<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8549
FOXMEYER HEALTH CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 25-1425889
- ------------------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1220 Senlac Drive, Carrollton, Texas 75006
- ------------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 214-446-4800
</TABLE>
Indicate by check mark whether the registrant (1) had filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Number of shares of Common Stock outstanding as of February 10, 1995: 16,501,973
<PAGE> 2
PART 1. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended
December 31,
-----------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $1,306,148 $1,396,705
Costs and expenses
Costs of goods sold (exclusive of depreciation shown separately below) 1,216,436 1,310,158
Selling, general and administrative expenses 66,664 73,319
Depreciation and amortization 6,350 5,430
- ------------------------------------------------------------------------------------------------------------------
16,698 7,798
Other income 4,396 4,272
- ------------------------------------------------------------------------------------------------------------------
Operating income 21,094 12,070
Financing costs
Interest income 1,028 568
Interest expense 7,512 6,731
- ------------------------------------------------------------------------------------------------------------------
Financing costs, net 6,484 6,163
- ------------------------------------------------------------------------------------------------------------------
Income before National Steel Corporation, income tax
provision (benefit) and minority interest 14,610 5,907
National Steel Corporation
Net preferred dividend income 1,359 1,131
- ------------------------------------------------------------------------------------------------------------------
Income before income tax provision (benefit) and minority interest 15,969 7,038
Income tax provision (benefit) 1,069 (1,045)
- ------------------------------------------------------------------------------------------------------------------
Income before minority interest 14,900 8,083
Minority interest in net income of consolidated subsidiaries 200 504
- ------------------------------------------------------------------------------------------------------------------
Net income 14,700 7,579
Preferred stock dividends 4,726 3,210
- ------------------------------------------------------------------------------------------------------------------
Net income applicable to common stockholders $ 9,974 $ 4,369
- ------------------------------------------------------------------------------------------------------------------
Net income per share $ 0.60 $ 0.28
- ------------------------------------------------------------------------------------------------------------------
Average number of shares outstanding 16,615 15,394
==================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (In Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------------------------------------------
Nine Months Ended
December 31,
-------------------------------
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net sales $3,813,505 $4,054,541
Costs and expenses
Costs of goods sold (exclusive of depreciation shown separately below) 3,556,471 3,800,630
Selling, general and administrative expenses 197,975 211,713
Depreciation and amortization 19,135 16,192
- ------------------------------------------------------------------------------------------------------------------
39,924 26,006
Other income 6,259 6,646
- ------------------------------------------------------------------------------------------------------------------
Operating income 46,183 32,652
Financing costs
Interest income 3,886 1,529
Interest expense 20,917 19,588
- ------------------------------------------------------------------------------------------------------------------
Financing costs, net 17,031 18,059
- ------------------------------------------------------------------------------------------------------------------
Income before National Steel Corporation, income tax provision (benefit)
and minority interest 29,152 14,593
National Steel Corporation
Net preferred dividend income 4,093 6,522
Unrealized loss on common stock investment - (6,800)
- ------------------------------------------------------------------------------------------------------------------
4,093 (278)
- ------------------------------------------------------------------------------------------------------------------
Income before income tax provision (benefit) and minority interest 33,245 14,315
Income tax provision (benefit) 2,565 (1,558)
- ------------------------------------------------------------------------------------------------------------------
Income before minority interest 30,680 15,873
Minority interest in net income of consolidated subsidiaries 4,082 2,891
- ------------------------------------------------------------------------------------------------------------------
Net income 26,598 12,982
Preferred stock dividends 14,221 5,740
- ------------------------------------------------------------------------------------------------------------------
Net income applicable to common stockholders $ 12,377 $ 7,242
- ------------------------------------------------------------------------------------------------------------------
Net income per share $ 0.87 $ 0.40
==================================================================================================================
Average number of shares outstanding 14,187 18,264
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------
December 31, March 31,
1994 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (Unaudited)
Current Assets
Cash and short-term investments $ 79,292 $ 60,987
Receivables - net 267,587 286,707
Inventories 888,301 624,574
Other current assets 51,635 37,299
- ------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,286,815 1,009,567
Investment in National Steel Corporation 32,263 29,261
Property, plant and equipment 238,551 204,504
Less: Allowance for depreciation and amortization 83,287 71,060
- ------------------------------------------------------------------------------------------------------------------
155,264 133,444
Other Assets
Goodwill - net 207,140 228,141
Intangible assets - net 20,171 12,786
Pre-bankruptcy receivable from Phar-Mor, Inc. 28,758 28,758
Deferred tax asset, net of valuation allowance 46,964 47,342
Miscellaneous assets 57,877 36,171
- ------------------------------------------------------------------------------------------------------------------
360,910 353,198
- ------------------------------------------------------------------------------------------------------------------
Total Assets $1,835,252 $1,525,470
==================================================================================================================
Liabilities And Stockholders' Equity
Current Liabilities
Accounts payable $ 766,526 $ 532,170
Accrued liabilities 53,233 70,861
Current deferred income taxes 34,952 29,360
Long-term debt due within one year 2,498 2,158
- ------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 857,209 634,549
Long-Term Debt 397,084 310,920
Other Liabilities 75,586 81,082
Minority Interest in Consolidated Subsidiaries 20,036 109,331
Redeemable Preferred Stock 175,589 164,833
Stockholders' Equity
Common stock, $5.00 par value; authorized 50,000,000 shares; issued
24,167,244 at December 31, 1994 and 23,995,744 at March 31, 1994 120,836 119,979
Capital in excess of par value 209,110 207,281
Minimum pension liability (73,797) (73,797)
Net unrealized holding gain (loss) on marketable securities 6,784 (225)
Retained earnings 175,176 173,029
- ------------------------------------------------------------------------------------------------------------------
438,109 426,267
Less: cost of common stock held in treasury - 7,147,595 shares
at December 31, 1994 and 11,125,441 shares at March 31, 1994 128,361 201,512
- ------------------------------------------------------------------------------------------------------------------
309,748 224,755
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $1,835,252 $1,525,470
==================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FoxMeyer Health Corporation and Subsidiaries (Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------
Nine Months Ended
December 31,
----------------------------
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income $ 26,598 $ 12,982
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Minority interest in net income of consolidated subsidiaries 4,082 2,891
Depreciation and amortization 19,135 16,192
Net preferred dividend income from National Steel Corporation (4,093) (6,522)
Unrealized loss on National Steel Corporation common stock investment - 6,800
Gain on sale of investments (3,962) -
Deferred tax expense (benefit) 1,704 (2,453)
Provision for losses on accounts receivable (75) 3,078
Cash provided (used) by working capital items, net of acquisitions:
Receivables (50,324) (101,157)
Inventories (264,299) (92,310)
Other assets 5,918 (772)
Accounts payable and accrued liabilities 206,489 100,593
Proceeds from accounts receivable financing program 75,000 125,000
Other (3,002) (1,912)
- ------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 13,171 62,410
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (40,756) (31,928)
Proceeds from the sale of property, plant and equipment 1,166 273
Prepayment on long-term commitment (290) (5,096)
Acquisitions, net of cash acquired (10,940) -
Proceeds from the sale of investments 27,756 1,871
Purchase of investments, net of returns (40,781) (5,844)
Other investing activities (183) 2,267
- ------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (64,028) (38,457)
- ------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Repayments under term loan - (125,000)
Borrowings under revolving credit facilities 1,884,931 1,371,550
Repayments under revolving credit facilities (1,797,531) (1,484,350)
Proceeds from issuance of long-term debt 11,482 235,000
Loan origination fees (625) (4,335)
Repurchase of common stock (17,006) -
Other debt repayments (9,319) (531)
Dividends paid to minority interests (1,907) (1,157)
Dividends paid on preferred stock (3,465) (3,795)
Other financing activities 2,602 (1,163)
- ------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 69,162 (13,781)
- ------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Short-Term Investments 18,305 10,172
Cash and Short-term Investments, Beginning of Period 60,987 54,504
- ------------------------------------------------------------------------------------------------------------------
Cash and Short-Term Investments, End of Period $ 79,292 $ 64,676
==================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of FoxMeyer Health
Corporation (formerly National Intergroup, Inc.) and its subsidiaries (the
"Corporation"), including FoxMeyer Corporation ("FoxMeyer"), a wholly-owned
subsidiary, and Ben Franklin Retail Stores, Inc. ("Ben Franklin"), a
67.7%-owned subsidiary. All significant intercompany balances and transactions
have been eliminated.
The accompanying condensed consolidated balance sheet of the Corporation as of
December 31, 1994, the condensed consolidated statements of income for the
three and nine months ended December 31, 1994 and 1993 and the condensed
consolidated statements of cash flows for the nine months ended December 31,
1994 and 1993 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited consolidated financial
statements and include all adjustments necessary for the fair presentation of
financial position, results of operations and cash flows. Such adjustments
were of a normal recurring nature. The results of operations for the three and
nine months ended December 31, 1994 are not necessarily indicative of the
results that may be expected for the entire year. The condensed consolidated
balance sheet as of March 31, 1994 was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles. Additional information is contained in the
Corporation's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended March 31, 1994, which should be read in
conjunction with this quarterly report.
NOTE 2 - NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is based on net income after preferred
stock dividend requirements and the weighted average number of shares of common
stock outstanding during the period after giving effect to stock options
considered to be dilutive common stock equivalents. Fully diluted net income
per share is not presented as it is substantially the same as primary earnings
per share.
NOTE 3 - ACQUISITION OF FOXMEYER'S MINORITY INTEREST
On October 12, 1994, the Corporation acquired, by way of merger of FoxMeyer
with and into a wholly-owned subsidiary of the Corporation, all of the
outstanding shares of FoxMeyer that it did not previously own in exchange for
approximately 4,981,000 shares of the Corporation's common stock. These shares
were issued from treasury stock held by the Corporation. As a result of this
transaction, FoxMeyer became a wholly-owned subsidiary of the Corporation. All
FoxMeyer stock options outstanding at the time of the merger, which were
exercisable for an aggregate of 1.2 million shares of FoxMeyer common stock,
were converted, under the terms of the merger, to 1.1 million options to
acquire the Corporation's common stock at prices ranging from $10.85 to $16.39
per share.
The merger transaction was accounted for by the purchase method of accounting.
The purchase price was allocated to the 19.5% of FoxMeyer acquired based on the
fair value of the assets acquired and liabilities assumed. The difference in
the fair value of the assets acquired and liabilities assumed and the market
value of the shares of common stock issued resulted in a $15.9 million
reduction in goodwill recorded on the original acquisition of FoxMeyer by the
Corporation in 1986. The reduction in goodwill will be amortized over the
remaining life of the original goodwill. The fair value of the assets acquired
and liabilities assumed is subject to change based on evidence of fair value
still to be obtained. The difference of approximately $10.2 million between
the fair value of the treasury shares issued ($80.0 million) and the average
cost of those shares was charged to retained earnings.
5
<PAGE> 7
Unaudited pro forma results of operations for the nine months ended December
31, 1994 and 1993, had the acquisition of FoxMeyer's minority interest taken
place at the beginning of the corresponding fiscal years, are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Nine months ended December 31,
---------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income before minority interest $ 30,796 $ 16,019
Minority interest in net income of consolidated subsidiaries 2,409 (398)
---------- ---------
Net income $ 28,387 $ 16,417
Net income applicable to common stockholders $ 14,166 $ 10,677
Net income per share $ 0.80 $ 0.46
Average number of shares outstanding 17,768 23,314
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The foregoing unaudited pro forma results of operations reflect the estimated
impact of the valuation of the assets acquired and liabilities assumed for the
19.5% of FoxMeyer common stock acquired on October 12, 1994 as if the purchase
had taken place at the beginning of the 1995 and 1994 fiscal years,
respectively. The additional shares of common stock of the Corporation issued
in the acquisition were assumed to be outstanding for the entire periods
presented. These results are not necessarily indicative of the results of
operations that would have occurred had the acquisition of FoxMeyer's 19.5%
minority interest actually taken place at the beginning of the fiscal year
presented, nor are these results of operations indicative of the future results
of operations of the Corporation.
NOTE 4 - INVESTMENTS
The Corporation's investments in marketable equity securities, included in
"Other current assets", are classified as "available for sale". The carrying
value and gross unrealized gains and losses are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
December 31, 1994 March 31, 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carrying value $ 28,763 $ 15,969
Unrealized gains 6,816 348
Unrealized losses 47 683
- -------------------------------------------------------------------------------------------------------------
</TABLE>
For the nine months ended December 31, 1994, the change in net unrealized
holding gains (losses) was a $7.0 million gain. Proceeds of $18.9 million were
received during the nine months ended December 31, 1994 from the sale of
marketable equity securities resulting in gross realized gains of $1.3 million
and gross realized losses of $0.4 million. The cost of securities sold was
determined using the average cost method.
NOTE 5 - LONG-TERM DEBT
During the quarter ended December 31, 1994, Ben Franklin entered into a new
revolving credit facility (the "Ben Franklin Facility") which expires in August
1996. The Ben Franklin Facility provides for a two-tier borrowing base of $15
million for the first six months of the calendar year and $25 million for the
remainder of the year. The Ben Franklin Facility is secured and bears interest
at the prime rate. Additional covenants prohibit, among other things, the
payment of dividends and require Ben Franklin to maintain certain financial
ratios.
6
<PAGE> 8
On November 22, 1994, FoxMeyer entered into an amendment to FoxMeyer's
revolving credit facility (the "FoxMeyer Credit Facility"), which raised the
aggregate commitment under the FoxMeyer Credit Facility to $275 million from
$210 million. The covenants under the FoxMeyer Credit Facility were not
materially changed as a result of the amendment. The FoxMeyer Credit Facility
provides for interest rates based on (i) a Eurodollar rate (as defined) plus a
variable fee that cannot exceed 1%, (ii) the prime rate or (iii) rates offered
by banks that are parties to the FoxMeyer Credit Facility. The maturity date
was extended to December 31, 1997.
On December 19, 1994, the Corporation amended its $15 million revolving credit
facility (the "Credit Facility") to allow for the repurchase of additional
shares of the Corporation's common stock. In addition, the collateral required
on the Credit Facility was raised to 4.0 million shares of FoxMeyer's common
stock on October 12, 1994.
NOTE 6 - ACCOUNTS RECEIVABLE FINANCING
On October 27, 1994, FoxMeyer amended its accounts receivable financing program
(the "Program") to extend the termination date of the Program to November 21,
1995 and to increase the participation interest in a defined pool of FoxMeyer's
trade receivables from $125 million to $200 million. Other terms of the
agreement were not significantly changed. The additional $75 million of
proceeds received on execution of the amendment were used to reduce amounts
outstanding under the FoxMeyer Credit Facility.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental cash flow information is provided for interest and
income taxes paid and for noncash transactions (in thousands of dollars):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Nine months ended December 31,
-------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $ 23,246 $ 13,605
Income taxes paid 917 240
Noncash transactions:
Payment of dividends in kind on preferred stock 9,748 1,754
Treasury stock exchanged for FoxMeyer common stock 90,157 -
- -------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Corporation has retained responsibility for certain potential environmental
liabilities attributable to former operating units and as a result is subject
to federal, state or local environmental laws, rules and regulations. The laws
generally impose joint and several liability on present and former owners and
operators, transporters and generators for remediation of contaminated
properties regardless of fault. The Corporation and its subsidiaries have
received various claims and demands from governmental agencies relating to
investigations and remedial actions to address environmental clean-up costs and
in some instances have been designated as a potentially responsible party by
the Environmental Protection Agency.
The Corporation's reserves for potential environmental assessments or
remediation activities, penalties or fines that may be imposed for non-
compliance with such laws or regulations have not changed materially since
March 31, 1994. The Corporation's estimates of these costs are based on
currently available facts, existing technologies, presently enacted laws and
regulations and the professional judgment of consultants and counsel.
The amounts of these liabilities are difficult to estimate due to such factors
as the unknown extent of remedial actions that may be required and, in cases of
sites not owned by the Corporation, the unknown extent of the Corporation's
probable liability in proportion to the probable liability of other parties.
Moreover, the Corporation may have environmental liabilities that the
Corporation cannot in its judgment estimate at this time and losses
attributable to remediation costs may arise at other sites. The Corporation
cannot now estimate the additional cost and expenses it may incur for such
environmental liabilities. While management of the Corporation does not
believe the liabilities associated with such other sites will have a material
adverse effect on its financial condition or results of operations, it
recognizes additional work may have to be performed to ascertain the ultimate
liability for such sites.
7
<PAGE> 9
There are various other pending claims and lawsuits arising out of the normal
conduct of the Corporation's businesses. In the opinion of management, the
ultimate outcome of these claims and lawsuits will not have a material effect
on the consolidated financial condition or results of operations of the
Corporation.
The Corporation continues to monitor the Phar-Mor, Inc. ("Phar-Mor") bankruptcy
proceedings closely and to work with Phar-Mor through the Unsecured Creditor's
Committee as Phar-Mor attempts to reorganize and emerge from bankruptcy. The
Corporation believes the $40.0 million allowance for possible loss it recorded
in December 1992 remains a reasonable estimate of its probable loss; however,
there may be future developments, and additional information may become
available, that indicate that the estimated loss should be adjusted. The
Corporation believes that future adjustments to the allowance recorded to date,
if any, would not have a material adverse effect on the Corporation's financial
condition. However, should such adjustments be necessary, the amounts could be
material to the results of operations for the period or periods in which they
are reported.
NOTE 9 - ACQUISITIONS AND INVESTMENTS
As of April 1, 1994, FoxMeyer acquired all of the outstanding stock of Scrip
Card Enterprises, Inc. ("Scrip Card") for $10.0 million. Based on Scrip Card
obtaining certain revenue targets during each of the three years ending March
31, 1997, an additional $6.0 million may be paid to the former stockholders of
Scrip Card. Scrip Card performs prescription benefit management services for
small to medium-sized businesses. The transaction was accounted for by the
purchase method of accounting. The purchase price has been allocated to the
assets and liabilities of Scrip Card in amounts equal to their fair market
values. Approximately $8.1 million of the purchase price was assigned to the
customer lists acquired in the transaction. The allocation of the purchase
price is subject to change based on evidence of fair value still to be
obtained. The results of operations of Scrip Card have been included in the
consolidated financial statements of the Corporation since its acquisition.
On June 28, 1994, FoxMeyer completed an amalgamation of a wholly-owned
subsidiary with Evans Health Group Limited ("Evans"). As a result of the
amalgamation and the simultaneous exercise of options for 2,000,000 shares of
Evans' common stock, which options FoxMeyer had previously acquired, FoxMeyer's
ownership interest in the amalgamated corporation, FoxMeyer Canada Inc.
("FoxMeyer Canada"), is 46.0%. FoxMeyer Canada provides health care and
pharmacy services in Canada. FoxMeyer's investment in FoxMeyer Canada at
December 31, 1994 was $2.2 million and was accounted for under the equity
method of accounting. FoxMeyer has options to acquire up to 8,000,000
additional shares of common stock of FoxMeyer Canada at prices ranging from (in
Canadian dollars) $1.50 to $3.00.
In October 1994, FoxMeyer acquired US Health Data Interchange, Inc. ("USHDI")
for $0.3 million. USHDI provides products and services linking medical
providers to payers nationwide, including practice management software and
services, electronic claims submission, on-line verification of eligibility and
benefits, and other electronic data interchange-related services. FoxMeyer
subsequently formed HealthConnect, a new subsidiary to provide prescription
benefit management services, data support, linkages and information management
services to health professionals throughout the United States. HealthConnect
is composed of the following FoxMeyer subsidiaries: USHDI, Health Care
Pharmacy Providers, Inc. and Scrip Card.
No pro forma combined results of operations of the Corporation and Scrip Card,
Fox Canada and USHDI have been presented as such amounts are not materially
different from those previously reported.
8
<PAGE> 10
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
FoxMeyer Health Corporation and its subsidiaries (the "Corporation") reported
net income of $14.7 million and $26.6 million for the three months and nine
months ended December 31, 1994, respectively. This represents an increase of
approximately $7.1 million and $13.6 million for the three and nine months
ended December 31, 1994, respectively, over the same periods of the prior
fiscal year. Net income per share was $0.60 and $0.87 per share for the three
and nine months ended December 31, 1994, respectively, as compared to $0.28 and
$0.40 per share for the three and nine months ended December 31, 1993,
respectively. Amounts applicable to common stockholders were significantly
affected by the Corporation's November 1993 exchange offer whereby
approximately 6.8 million shares of the Corporation's common stock were
exchanged for 3.4 million shares of a new series of preferred stock. As a
result, preferred stock dividends increased from $5.7 million to $14.2 million
for the nine months ended December 31, 1993 and 1994, respectively.
Significant transactions occurring during the nine months ended December 31,
1994 include:
In April 1994, FoxMeyer Corporation ("FoxMeyer") acquired Scrip Card
Enterprises, Inc. ("Scrip Card"), a Utah company engaged in prescription
benefit management services to small and medium-sized businesses. Scrip
Card was acquired for the purpose of expanding and enhancing FoxMeyer's
present prescription benefit management programs.
In June 1994, FoxMeyer entered the Canadian health care market through an
amalgamation of a wholly-owned subsidiary with Evans Health Group Limited.
Subsequent to the amalgamation, FoxMeyer's ownership interest in the
amalgamated corporation, FoxMeyer Canada Inc. ("FoxMeyer Canada"), is
46.0%. FoxMeyer Canada provides health care, pharmacy and benefit
management services in Canada.
In July 1994, FoxMeyer announced that it had signed an agreement with the
University Hospital Consortium ("UHC") for an initial three-year term with
UHC having two one-year renewal options. UHC represents an alliance of 67
academic medical centers. When the contract becomes fully effective in
February 1995, FoxMeyer will serve as the primary supplier to UHC members
that participate in UHC's pharmacy purchasing program. FoxMeyer's
management anticipates that the UHC contract will generate $750 million to
$800 million in additional prescription drug sales in the first full year
of the contract. FoxMeyer has opened seven new warehouses in California,
Arizona, Utah, Washington, Tennessee, and New Jersey to service the UHC
contract.
On October 12, 1994, FoxMeyer merged with and into a wholly-owned
subsidiary of the Corporation pursuant to which the stockholders of
FoxMeyer, other than the Corporation, received 0.904 shares of the common
stock of the Corporation for each share of FoxMeyer's common stock in a
tax-free reorganization.
In October 1994, FoxMeyer acquired US Health Data Interchange, Inc.
("USHDI"). USHDI provides products and services linking medical providers
to payers nationwide, including practice management software and services,
electronic claims submission, on-line verification of eligibility and
benefits, and other electronic data interchange-related services.
FoxMeyer subsequently formed HealthConnect, a new subsidiary to provide
prescription benefit management services, data support, linkages and
information management services to health professionals throughout the
United States. HealthConnect is composed of the following FoxMeyer
subsidiaries: USHDI, Health Care Pharmacy Providers, Inc. and Scrip Card.
Ben Franklin Retail Stores, Inc. ("Ben Franklin") entered into franchise
agreements with Crafts Plus +, Inc. ("Crafts Plus"), a chain of
approximately 45 crafts stores, on November 9, 1994. Crafts Plus is
headquartered in San Antonio, Texas and has stores in Texas, Louisiana,
Missouri, Alabama and New Mexico. The stores currently operate primarily
under the Crafts, Etc. name and will be converted to Ben Franklin crafts
stores within 12 months. Ben Franklin entered into a purchase requirement
agreement that requires that Crafts Plus purchase at least 75% of its
merchandise from Ben Franklin at prevailing prices. In addition, Ben
Franklin will receive royalty payments from these stores. Also, on
November 9, 1994, Ben Franklin loaned Crafts Plus $4.9 million under an
unsecured, subordinated note which is convertible into 49% of Crafts Plus'
common stock at the option of Ben Franklin. The note bears interest at
prime plus 2%, has a maturity date of December 31, 1999 and contains
certain financial covenants.
9
<PAGE> 11
In January 1995, Ben Franklin announced the signing of an agreement with
Cotter & Company in which Ben Franklin would offer to supply a majority of
Cotter & Company's variety wholesale customers, including 800 V&S variety
stores. Ben Franklin will purchase up to $8.6 million of selected variety
merchandise and related goods from Cotter & Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1994 COMPARED TO
THREE MONTHS ENDED DECEMBER 31, 1993
Net sales decreased $90.6 million to $1,306.1 million for the three months
ended December 31, 1994, as compared to $1,396.7 million for the three months
ended December 31, 1993. Net sales decreased across all of FoxMeyer's customer
segments with the exception of Hospitals and Alternate Care. The sales decline
at FoxMeyer was due primarily to (i) intense competition among pharmaceutical
distributors for new customers, (ii) a decrease in sales to Phar-Mor, Inc.
("Phar-Mor") as a result of continuing store closures, and (iii) FoxMeyer's
decision in some cases not to lower prices to keep certain accounts. Ben
Franklin's net sales were up slightly over the same period in the prior year
primarily from the increase from 10 to 28 in the number of company-owned crafts
superstores opened.
Gross profit increased $3.2 million to $89.7 million for the three months ended
December 31, 1994 as compared to the same period in the prior year. As a
percentage of sales, gross margin increased from 6.2% to 6.9% of net sales for
the three months ended December 31, 1993 and 1994, respectively. The increase
was principally due to higher margins on Ben Franklin's wholesale sales, higher
margins associated with increased sales at Ben Franklin's company-owned stores
and the expansion of FoxMeyer's managed care business under HealthConnect which
is a higher margin business. FoxMeyer's gross margin for warehouse sales
increased slightly in the current period as compared to the prior year. Price
competition in FoxMeyer's industry and the decline in inventory investment
buying opportunities continue to exert pressure on gross margin. To offset
these pressures, FoxMeyer has undertaken to increase gross margin by providing
value-added services, emphasizing private label and generic products,
increasing sales of higher margin product lines and expanding higher margin
businesses such as managed care activities.
Operating expenses decreased $5.7 million to $73.0 million for the three months
ended December 31, 1994 as compared to $78.7 million for the three months ended
December 31, 1993. FoxMeyer accounted for $4.5 million of the decline. This
decrease is the result of FoxMeyer's cost containment and cost reduction
programs as well as the effect of lower sales volume. The effect of these
programs was partially offset by additional expenses that were incurred in
connection with the expansion of managed care businesses, development of
certain software products and realignment of distribution centers. Ben
Franklin's operating expenses decreased $1.2 million. Without the effect of a
$5.3 million restructuring charge recorded in the prior year, operating
expenses for Ben Franklin would have increased $4.1 million primarily as a
result of the increase in the number of company-owned crafts superstores.
Other income increased $0.1 million to $4.4 million for the three months ended
December 31, 1994 as compared to the same period in the prior year. In
addition to recurring items, principally fees collected on past-due receivables
and costs related to the accounts receivable financing program, other income
also includes certain transactions not common to both periods. For the three
months ended December 31, 1993, the Corporation recognized a gain on the
termination of certain operating leases. In the current year, the Corporation
recognized income from a contingent fee arising from a fiscal 1990 asset sale,
gains on the sale of certain short-term investments, and a loss on the
write-off of obsolete software. In addition, the cost of the accounts
receivable financing program rose $1.5 million to $2.4 million for the current
year principally as a result of an increase in the average amount of
receivables sold from approximately $83 million for the three months ended
December 31, 1993 to $175 million for the three months ended December 31, 1994.
The Corporation may receive additional contingent fees in each of the next five
years principally dependent on aluminum prices. No contingent fees were
received in fiscal 1994.
Net financing costs increased $0.3 million to $6.5 million for the three months
ended December 31, 1994, as compared to $6.2 million for the three months ended
December 31, 1993. Interest income increased $0.5 million principally as a
result of the income on notes receivable held by real estate limited
partnerships. Interest expense increased $0.8 million. Average debt for the
quarter increased by approximately $13.8 million over the three months ended
December 31, 1993 primarily as a result of increased borrowing by Ben Franklin
and debt incurred by the Corporation's real estate limited partnerships. On
average, the Corporation's cost of debt increased 90 basis points as compared
to the three months ended December 31, 1993 reflecting the overall increase in
rates since December 1993 on the revolving debt of the Corporation and its
subsidiaries.
10
<PAGE> 12
The net preferred income for National Steel Corporation ("NSC") was $1.4
million for the three months ended December 31, 1994, compared to $1.1 million
for the prior year period. The $0.3 million increase primarily results from
lower expenses related to the Weirton liabilities.
The income tax provision for the third quarter of fiscal 1995 was $1.1 million
as compared to a benefit of $1.0 million for the three months ended December
31, 1993. The provision (benefit) for both periods was based on estimates of
the full year effective tax rate. The income tax provision (benefit) reflects
the income taxes related to Ben Franklin which cannot be consolidated in the
Corporation's federal income tax return. The low effective tax rate for the
current quarter and the benefit for the prior year were also the result of the
reduction in the deferred tax asset valuation allowance.
The minority interest in the net income of consolidated subsidiaries was $0.2
million for the three months ended December 31, 1994, compared to $0.5 million
for the three months ended December 31, 1993. The decrease was attributable to
the elimination of the minority interest in FoxMeyer resulting from the merger
transaction in October 1994 partially offset by the increase in net income of
Ben Franklin and the Corporation's real estate limited partnerships.
Preferred stock dividends were $4.7 million for the three months ended December
31, 1994, compared to $3.2 million for the three months ended December 31,
1993. In November 1993, the Corporation exchanged approximately 6.8 million
shares of common stock for 3.4 million shares of a new series of preferred
stock. The additional dividends represent the dividends declared on the new
series of preferred stock and the accretion of discount recorded on this series
of preferred stock.
NINE MONTHS ENDED DECEMBER 31, 1994 COMPARED TO
NINE MONTHS ENDED DECEMBER 31, 1993
Net sales decreased $241.0 million to $3,813.5 million for the nine months
ended December 31, 1994, as compared to $4,054.5 million for the nine months
ended December 31, 1993. Net sales decreased across all of FoxMeyer's customer
segments with the exception of Hospitals and Alternate Care. The sales decline
at FoxMeyer was due primarily to (i) intense competition among pharmaceutical
distributors for new customers, (ii) a decrease in sales to Phar-Mor as a
result of continuing store closures, and (iii) FoxMeyer's decision in some
cases not to lower prices to keep certain accounts. Ben Franklin's net sales
were up slightly over the same period in the prior year primarily from the
increase from 10 to 28 in the number of company-owned crafts superstores
opened.
Gross profit increased $3.1 million to $257.0 million for the nine months ended
December 31, 1994 as compared to the same period in the prior year. As a
percentage of sales, gross margin increased from 6.3% to 6.7% of net sales for
the nine months ended December 31, 1993 and 1994, respectively. The increase
was principally due to higher margins on Ben Franklin's wholesale sales, the
effect of higher margins associated with increased sales at Ben Franklin's
company-owned stores and the expansion of FoxMeyer's managed care business
under HealthConnect which is a higher margin business. FoxMeyer's gross margin
for warehouse sales remained at the same level as compared to the prior year.
Price competition in FoxMeyer's industry and the decline in inventory
investment buying opportunities continue to exert pressure on gross margin. To
offset these pressures, FoxMeyer has undertaken to increase gross margin by
providing value-added services, emphasizing private label and generic products,
increasing sales of higher margin product lines and expanding higher margin
businesses such as managed care activities.
Operating expenses decreased $10.8 million to $217.1 million for the nine
months ended December 31, 1994 as compared to $227.9 million for the nine
months ended December 31, 1993. FoxMeyer accounted for $10.9 million of the
decrease. This decrease is the result of FoxMeyer's cost containment and cost
reduction programs as well as the effect of lower sales volume. The impact of
these programs was partially offset by additional expenses that were incurred
for the expansion of managed care businesses, the continued development of
customer software products and realignment of distribution centers. Ben
Franklin's operating expenses increased $0.9 million. Without the effect of a
$5.3 million restructuring charge recorded in the prior year, operating
expenses for Ben Franklin would have increased $6.2 million primarily as a
result of the increase in the number of company-owned crafts superstores.
Other income decreased $0.4 million to $6.3 million for the nine months ended
December 31, 1994 as compared to the same period in the prior year. In
addition to recurring items, principally fees collected on past-due receivables
and costs related to the accounts receivable financing program, other income
also includes certain transactions not common to both periods. For the nine
months ended December 31, 1993, the Corporation recognized a gain on the
termination of certain operating leases. In the current year, the Corporation
recognized income from a contingent fee arising from a fiscal 1990 asset sale,
gains on the sale of certain short-term investments, gains on the sale of
properties and other transactions
11
<PAGE> 13
completed by the Corporation's real estate limited partnerships and a loss on
the write-off of certain obsolete software. In addition, the cost of the
accounts receivable financing program rose $4.9 million to $5.8 million for the
current year as a result of the increase in the period of time the accounts
receivable financing program has been in effect and from an increase in the
program from $125 million to $200 million in November 1994.
Net financing costs decreased $1.1 million to $17.0 million for the nine months
ended December 31, 1994, as compared to $18.1 million for the nine months ended
December 31, 1993. Interest income increased $2.4 million primarily as a
result of the income on notes receivable held by real estate limited
partnerships. Interest expense increased $1.3 million. Average debt for the
nine months ended December 31, 1994 increased approximately $7.1 million over
the nine months ended December 31, 1993 primarily due to increased borrowing by
Ben Franklin and debt incurred by the Corporation's real estate limited
partnerships. On average, the Corporation's cost of debt increased 60 basis
points as compared to the nine months ended December 31, 1993 reflecting the
overall increase in rates since December 31, 1993 on the revolving debt of the
Corporation and its subsidiaries.
Results attributable to the NSC investment were $4.1 million for the nine
months ended December 31, 1994, compared to a loss of $0.3 million for the
prior year period. The increase is principally the result of a $6.8 million
unrealized loss recorded in the second quarter of the prior year on the
Corporation's investment in NSC common stock. Offsetting this decrease was a
$2.4 million gain recognized in May 1993 on the redemption of 10,000 shares of
NSC preferred stock owned by the Corporation.
The income tax provision for the nine months ended December 31, 1994 was $2.6
million as compared to a benefit of $1.6 million for the nine months ended
December 31, 1993. The provision (benefit) for both periods was based on
estimates of the full year effective tax rate. The income tax provision
(benefit) reflects the income taxes related to Ben Franklin which cannot be
consolidated in the Corporation's federal income tax return. The low effective
tax rate for the current period and the benefit for the prior year were also
the result of the reduction in the deferred tax asset valuation allowance.
The minority interest in the net income of consolidated subsidiaries was $4.1
million for the nine months ended December 31, 1994, as compared to $2.9
million for the nine months ended December 31, 1993. The increase was
attributable to the increase in net income of Ben Franklin, the Corporation's
real estate limited partnerships and FoxMeyer prior to the acquisition of
FoxMeyer's minority interest in October 1994.
Preferred stock dividends were $14.2 million for the nine months ended December
31, 1994, compared to $5.7 million for the nine months ended December 31,
1993. In November 1993, the Corporation exchanged approximately 6.8 million
shares of common stock for 3.4 million shares of a new series of preferred
stock. The additional dividends represent the dividends declared on the new
series of preferred stock and the accretion of discount recorded on this series
of preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations (which includes working capital components) was
$13.2 million for the nine months ended December 31, 1994. The change in
working capital components used $102.2 million of funds. Operations and the
sale of $75 million of receivables provided $115.4 million of funds. The
increase in accounts payable and accrued liabilities of $206.5 million
primarily related to the funding of the increase in inventories.
Cash used in investing activities was $64.0 million for the nine months ended
December 31, 1994. Approximately $40.8 million of funds were used to purchase
property and equipment during this period. The Corporation intends to spend an
additional $12.0 million during the remainder of the fiscal year on the
purchase of property and equipment. An additional $10.9 million was used to
acquire Scrip Card and other acquisitions, net of cash acquired. The
Corporation made other investments in real estate and marketable securities
which used approximately $13.0 million of funds, net of proceeds from the sale
of investments, during the nine months ended December 31, 1994.
Financing activities provided $69.2 million of funds for the nine months ended
December 31, 1994. The proceeds from issuance of long-term debt and other debt
repayments were primarily related to the Corporation's real estate operations.
Net borrowings under the Corporation's various credit facilities increased by
$87.4 million during this period. Approximately $17.0 million was used to
purchase shares of the Corporation's common stock.
12
<PAGE> 14
Management assesses the Corporation's liquidity based on its major business
segments: FoxMeyer, Ben Franklin, and certain holding company, corporate
office and other miscellaneous activities (collectively, the "Holding Company")
which includes the Corporation's real estate limited partnership activities.
Each of the business segments must, for the most part, fund its own operations
and capital needs. FoxMeyer's debt agreements allow, among other things,
payments to the Holding Company under a tax sharing agreement between the
Holding Company and FoxMeyer and for dividend payments to the Holding Company
subject to certain limitations. Under the most restrictive of the limitations,
approximately $21.4 million was available as of December 31, 1994 from which
future dividends may be paid to the Holding Company by FoxMeyer. Ben Franklin
may not pay any dividends to the Holding Company under its debt agreements.
Both Ben Franklin's and FoxMeyer's debt agreements also restrict intercompany
loans or other asset transfers with the Corporation.
FoxMeyer
As of December 31, 1994, FoxMeyer had borrowed $122.5 million under its $275.0
million revolving credit facility (the "FoxMeyer Facility"). The average and
maximum amounts borrowed during the nine months ended December 31, 1994 under
FoxMeyer's revolving credit facilities were $57.4 million and $178.6 million,
respectively. On October 27, 1994, FoxMeyer amended its accounts receivable
financing program (the"Program") to extend the termination of the Program to
November 21, 1995 and to increase the participation interest in a defined pool
of FoxMeyer's trade receivables from $125 million to $200 million. The
additional $75 million of proceeds received from the sale of trade receivables
were used to reduce amounts outstanding under the FoxMeyer Facility.
FoxMeyer expects that cash flow from operations and continued maintenance of
its working capital facilities will provide adequate cash to fund seasonal
increases in inventories and receivables. As a result of the UHC contract and
the additional seven warehouses that will be opened to service that business,
as well as continuing investments in managed care businesses, it may be
necessary for FoxMeyer to expand existing lines of credit or seek alternative
financing. FoxMeyer believes that, if required, alternative financing can be
obtained at reasonable rates.
Ben Franklin
As of December 31, 1994, Ben Franklin had borrowed $8.4 million under the $25
million currently available under its revolving credit facility (the "Ben
Franklin Facility"). The average and maximum amounts borrowed under the Ben
Franklin Facility during the nine months ended December 31, 1994 were $9.5
million and $24.0 million, respectively.
The Ben Franklin Facility has a two-tier revolving line of credit of $15
million for the first half of the calendar year and $25 million for the
remainder of the year. The Ben Franklin Facility expires on August 1, 1996.
The borrowings bear interest at the prime rate and are secured by Ben
Franklin's wholesale inventory and accounts receivable. The Ben Franklin
Facility prohibits the payment of dividends, contains a number of covenants and
conditions and requires Ben Franklin to maintain certain financial ratios.
Ben Franklin's management believes that cash on hand, cash generated by
operations, borrowings under its revolving credit facility, credit from its
vendors and customer financing programs will be sufficient to fund normal
working capital needs and to fund expected capital expenditures of $2.4 million
during the remainder of the fiscal year. Ben Franklin may also use these
sources of funds to repurchase up to 1.1 million shares of Ben Franklin's
common stock under a plan announced October 5, 1994. As a result of the
acquisition of business from Crafts Plus and Cotter & Company as discussed
above, Ben Franklin may need to seek additional financing to fund increases in
working capital. Ben Franklin believes that, if necessary, additional
financing can be obtained at reasonable rates.
During fiscal 1994, Ben Franklin established a $5.3 million reserve for
restructuring its wholesale distribution operations. Approximately $0.8
million represented a non-cash write down of variety store inventories and
another $0.8 million was spent during fiscal 1994 for workforce reduction and
relocation costs. During the nine months ended December 31, 1994, an
additional $1.3 million was expended on workforce reduction and relocation
costs. All workforce reductions have now been completed resulting in the
termination of 27 employees. The remaining balance of $2.4 million is for
expenditures to complete warehouse relocations. These expenditures are
expected to continue into the next fiscal year.
13
<PAGE> 15
Holding Company
At December 31, 1994, the Holding Company had unrestricted cash and short-term
investments of approximately $5.0 million. In addition, the Holding Company
had $3.8 million available under a revolving credit facility (the "Credit
Facility"). The Holding Company's cash requirements include the funding of
monthly operating expenses, lease commitments, benefit obligations, dividend
payments on the Corporation's redeemable preferred stock and mandatory sinking
fund payments thereon, and cash outlays attributable to environmental
liabilities of previously owned businesses, the amounts and timing of which are
uncertain.
In addition to the Credit Facility, the Corporation has a $30.0 million loan
from FoxMeyer. Both of these financing arrangements are secured by shares of
the common stock of FoxMeyer and restrict the payment of cash dividends on the
Corporation's common stock and on its Series A preferred stock. The average
and maximum amounts borrowed under the Credit Facility during the nine months
ended December 31, 1994 were $4.8 million and $14.2 million, respectively.
The Holding Company will rely on cash on hand, dividends received on shares of
FoxMeyer common stock, payments from FoxMeyer under its tax sharing agreement
and funds available under the Credit Facility to meet the cash funding
obligations described above. The Corporation may also receive additional
contingent fees arising from a fiscal 1990 asset sale in each of the next five
years principally dependent on aluminum prices. The Holding Company may also
use these sources of funds and proceeds from sale of investments to fund its
purchase of the Corporation's common stock under previously announced common
stock buy-back programs including a new program to purchase up to 1 million
shares that was announced in January 1995.
Other Matters
The Corporation continues to monitor the Phar-Mor bankruptcy proceedings
closely. The Corporation believes the $40 million allowance for possible loss
recorded in December 1992 remains a reasonable estimate of its probable loss.
The Corporation believes any future adjustments to this amount, if they should
be necessary, may be material to the results of operations for the period or
periods in which they are reported, but the adjustments, if any, would not have
a material effect on the Corporation's financial condition.
14
<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
With respect to the matters reported in the Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994, as
supplemented by the Corporation's Quarterly Reports on Form 10-Q for
the quarters ended June 30, 1994 and September 30, 1994, respectively,
the following additional information is provided:
National Steel Corporation
National Steel Corporation ("NSC"), Earth Sciences, Inc. ("ESI") and
Southwire Company ("Southwire") were the original general partners in
the Alumet Partnership ("Alumet"). In 1983, NSC assigned its
partnership interest in Alumet to the Corporation. The Environmental
Protection Agency (the "EPA") issued a Special Notice Letter on May
11, 1994 to Alumet alleging that Alumet is a potentially responsible
party under the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") for cleanup of the Lowry Landfill Superfund
Site and demanding payment of the EPA's past and future response
costs. Alumet has responded to the Special Notice Letter, denying
liability but offering to meet with the EPA for the purpose of
discussing its participation in either the performance of the
remediation or payment of the EPA's response costs.
On July 6, 1994, the City and County of Denver, Waste Management of
Colorado, Inc. and Chemical Waste Management, Inc. served Alumet and
Southwire with a complaint alleging that Alumet, the Corporation,
Southwire and NSC, as well as other parties, are liable for the cost
of cleaning up the Lowry Landfill. The complaint has not yet been
served on the Corporation. On August 15, 1994, Alumet answered the
complaint, denying liability and raising a number of affirmative
defenses and counter claims. A Scheduling Order was entered on
October 17, 1994 and discovery has commenced.
During the time period relevant to Alumet's involvement at the Lowry
Landfill, Alumet and its partners were insured under policies of
insurance purchased by NSC. Alumet has asserted claims against these
policies, but to date no insurer has agreed to defend or indemnify
Alumet or its partners against the Lowry Landfill claims. On August
9, 1994, Alumet commenced a lawsuit in Colorado, Alumet Partnership v.
Continental Casualty Co., No. 94-CV-1728 (Colo. Dist. Ct., Arapahoe
County), against three insurers seeking a declaratory judgment that
Alumet is entitled to coverage for the Lowry Landfill claims and
damages for breach of contract.
Alumet received, on November 22, 1994, a Unilateral Administrative
Order (the "Order") from the EPA directing each of the recipients of
the Order to perform the remedial design and take remedial action at
the Lowry Landfill Superfund Site. The Corporation is one of many
parties covered by the terms of the Order. Alumet believes it has
significant defenses to the Order and continues to evaluate those
defenses with its counsel. In addition, Alumet has been engaged in
settlement discussions with representatives of the EPA concerning
resolution of its alleged responsibility for remediation at the Lowry
Landfill Site. As a consequence of these discussions, Alumet's formal
response to the Order has been suspended until February 10, 1995 and
EPA counsel has advised that the response deadline will be extended
further, perhaps as much as eight weeks.
FoxMeyer Corporation
FoxMeyer Drug Company ("FoxMeyer Drug"), a wholly-owned subsidiary of
FoxMeyer Corporation ("FoxMeyer"), is a defendant in several class
action suits originally filed in late 1993 by independent retail drug
stores in the U.S. District Court for the Southern District of New
York. By order of the Judicial Panel on Multidistrict Litigation
dated February 4, 1994, all related actions pending in various federal
courts on the subject matter were consolidated and coordinated for
pretrial purposes in the U.S. District Court for the Northern District
of Illinois. FoxMeyer Drug was not named as a defendant in any other
of the pending actions. Thereafter, on or about March 9, 1994, a
Consolidated and Amended Class Action Complaint titled In re Brand
Name Prescription Drugs Antitrust Litigation (the "Amended Complaint")
was filed consolidating all pending class actions, including those in
which FoxMeyer Drug was a named defendant. The Amended Complaint
alleges, on behalf of a purported class of retail pharmacies, that the
pharmaceutical manufacturers and drug wholesalers conspired to fix the
prices of prescription drugs sold to retail drug stores. Plaintiffs
seek treble damages of an unspecified amount, injunctive relief and
attorneys' fees.
15
<PAGE> 17
On April 26, 1994, all drug wholesalers named as defendants in the
Amended Complaint moved for summary judgment. On October 18, 1994,
the Court denied the motion for summary judgment, permitting
plaintiffs to go forward with discovery. The wholesaler defendants,
including FoxMeyer Drug, expect that they will renew their motion for
summary judgment after discovery has been completed. FoxMeyer Drug
believes that it has meritorious defenses to the allegations asserted
against it and is vigorously defending itself in this litigation.
On or about July 29, 1994, an action was commenced by five Wisconsin
retail pharmacies in the Circuit Court of Dane County, Wisconsin, in
which FoxMeyer Drug was named as a defendant (K-S Pharmacies, Inc. et
al. v. Abbott Laboratories, et al.). This action, asserted on behalf
of an alleged class of retail pharmacies, alleges violations of
certain Wisconsin price discrimination, conspiracy and antitrust
statutes in connection with the sale of prescription drugs in
Wisconsin. The complaint seeks injunctive relief and treble damages.
On October 3, 1994, FoxMeyer Drug, as well as other defendants, filed
a motion to stay this action, a motion to dismiss or, in the
alternative, for a more definite statement. The Court denied the
motion to stay and reserved decision on the motion to dismiss.
FoxMeyer Drug believes it has meritorious defenses to the allegations
asserted against it and is vigorously defending itself in this action.
Effective on October 26, 1994, FoxMeyer Drug entered into a Judgment
Sharing Agreement (the "Agreement") with the manufacturer defendants
in these actions. Under the terms of the Agreement, FoxMeyer Drug's
liability for damages in any action (including the Wisconsin action)
in which there is a judgment against a manufacturer and wholesaler
will be limited to a maximum of $1 million. In the event the
manufacturer defendants settle, the Agreement provides that no
contribution to such settlement would be required of FoxMeyer Drug.
Also pursuant to the Agreement, FoxMeyer Drug, along with the other
wholesalers who are defendants in the federal actions, will be
entitled to reimbursement from the manufacturer defendants for its
expenses of litigating these actions. The manufacturers have agreed
to reimburse up to an aggregate amount of $9 million in wholesaler
expenses, to be allocated among the six wholesaler defendants in
approximate accord with relative expenses actually incurred. FoxMeyer
Drug, in turn, released such antitrust claims as it might have had
against any of the manufacturers based on the conduct alleged in the
actions.
In December, the Plaintiffs filed a motion to void the Agreement as
illegal and against public policy. FoxMeyer Drug and the other
defendants believe the motion is without merit and have responded
accordingly. A decision is pending.
FoxMeyer Health Corporation
Shortly after the announcement of the initial offer with respect to
the merger of National Intergroup, Inc. ("NII") and FoxMeyer (the
"Initial Offer"), class action lawsuits were filed against NII,
FoxMeyer and certain of FoxMeyer's officers and directors alleging,
among other things, that the defendants breached their fiduciary
duties owed to holders of shares of FoxMeyer common stock.
The class action lawsuits, which have been consolidated, sought to
enjoin the transaction contemplated by the Initial Offer or, if
consummated, to rescind the transaction, and requested an award for
money damages, attorneys' fees and costs. In connection with the
merger transaction as consummated on October 12, 1994 (the "Merger"),
an agreement in principle between plaintiffs and the defendants
concerning the terms of the Merger and the settlement of the class
action lawsuits was reached and a Memorandum of Understanding was
executed on June 30, 1994. The Memorandum of Understanding provides,
in substance, that, subject to confirmatory discovery, plaintiffs will
enter into a settlement of the class action lawsuits, which settlement
will be subject to conditions, including, among other things, entry of
a judgment dismissing the class action lawsuits. The Memorandum of
Understanding also provides that defendants entered into such
Memorandum of Understanding to, among other things, eliminate the
burden and expense of future litigations. The proposed settlement
will provide for a complete discharge, settlement and release of, and
an injunction barring, all claims, rights, causes of action, suits,
matters and issues, whether known or unknown, that have been, could
have been, or in the future might be asserted in the class action
lawsuits or in any proceedings by or on behalf of the plaintiffs. In
connection with such settlement, the corporate defendants would pay
the plaintiffs' counsel fees and expenses in an amount not to exceed
$410,000, as may be awarded by the Court to such counsel. The
defendants have answered the consolidated class action complaint,
denying the material allegations therein, including allegations that
any of them committed or have threatened to commit any violations of
law or breaches of duty to the plaintiffs and asserting certain
affirmative defenses.
16
<PAGE> 18
On September 20, 1994, counsel for plaintiffs in two of the class
action lawsuits informed counsel for the defendants that those
plaintiffs (the "Withdrawing Plaintiffs") were withdrawing from the
Memorandum of Understanding and would seek to oppose any settlement of
the class action lawsuits on the terms set forth in the Memorandum of
Understanding. Plaintiffs in all of other actions (the"Non-
Withdrawing Plaintiffs") continued to engage in discovery pursuant to
the Memorandum of Understanding.
On September 30, 1994, the Withdrawing Plaintiffs filed a motion for a
preliminary injunction seeking to enjoin the consummation of the
Merger and sought to schedule a date for a preliminary injunction
hearing. That same day, the Court denied the request to schedule a
preliminary injunction hearing.
On October 11, 1994, the State of Wisconsin Investment Board ("SWIB"),
alleging that it was a shareholder of FoxMeyer, moved to intervene in
the consolidated class action lawsuits, seeking to file a complaint in
intervention challenging the Merger and defendants' conduct in
connection therewith.
On December 2, 1994, SWIB withdrew its motion to intervene in the
consolidated class action lawsuits and filed a complaint entitled
State of Wisconsin Investment Board v. FoxMeyer Health Corp., et. al.,
in the Delaware Chancery Court in and for New Castle County against
the same persons named as defendants in the consolidated class action
lawsuits. The SWIB complaint alleges that the defendants breached
their fiduciary duties to FoxMeyer's shareholders by agreeing to the
Merger at an unfair price and at a time designed so that NII could
take advantage of, among other things, an alleged substantial growth
in the business of FoxMeyer. The SWIB complaint also alleges that the
proxy statement issued in connection with the Merger failed to
disclose (i) that the FoxMeyer Special Committee never examined the
basis for FoxMeyer's projections or took into account in reviewing
those projections certain increases in business expected by FoxMeyer,
(ii) that certain analyses used by Smith Barney in rendering its
fairness opinion on the Merger were flawed, and (iii) that FoxMeyer's
actual performance was substantially exceeding projections at the time
of the issuance of the proxy statement. Defendants have filed a
motion to stay the SWIB action, which motion is currently pending.
Defendants intend to contest the allegations in the SWIB complaint.
Pursuant to the Memorandum of Understanding, the parties have engaged
in and have substantially completed confirmatory discovery. To date,
no settlement agreement has been entered into. In the event a
settlement agreement is entered into, it is expected that stockholders
of FoxMeyer separately will be provided a notice containing future
information regarding the proposed settlement and related proceedings,
including a settlement hearing to be scheduled by the court. In the
event a settlement agreement is not entered into, defendants intend to
vigorously defend both the consolidated class action lawsuits and the
action brought by SWIB.
17
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10-A Third Amendment to Loan Agreement dated as of October
12, 1994 among the Corporation, the Banks identified
therein and Banque Paribas, as Agent for the Banks.
10-B Fourth Amendment to Loan Agreement dated as of
December 19, 1994, among the Corporation, the Banks
identified therein and Banque Paribas, as Agent for
the Banks.
10-C Fourth Amendment to Amended and Restated Loan
Agreement, Consent and Waiver, dated as of November
22, 1994, among FoxMeyer Corporation, FoxMeyer Drug
Company, Merchandise Coordinator Services
Corporation, Harris Wholesale Company, the Lenders
and Issuer referred therein, Citicorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank
of Texas, N.A. and Banque Paribas, as Co-Agents for
the Lenders.
10-D Second Amendment dated as of November 22, 1994 to
Trade Receivables Purchase and Sale Agreement dated
as of October 29, 1993 among FoxMeyer Corporation,
Corporate Asset Funding Company, Inc., Enterprise
Funding Corporation, Citibank, N.A., NationsBank of
North Carolina, N.A., individually and as Co-Agent,
Citicorp North America, Inc., individually and as
agent, and the Banks listed therein.
10-E Amendment dated October 12, 1994 to the 1993 Stock
Option and Performance Award Plan of the Corporation.
11 Computation of earnings per share of common stock.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Corporation filed the following reports on Form 8-K during
the three months ended December 31, 1994:
Current Report on Form 8-K dated October 10, 1994 regarding
the revised exchange ratio with respect to the Agreement and
Plan of Merger among the Corporation, FoxMeyer Acquisition
Corp. and FoxMeyer Corporation.
Current Report on Form 8-K dated October 12, 1994 regarding
the merger of FoxMeyer Corporation into a wholly-owned
subsidiary of the Corporation.
18
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
FOXMEYER HEALTH CORPORATION
By: /s/ Edward L. Massman
-----------------------------
Edward L. Massman
Vice President and Controller
(Chief Accounting Officer)
Date: February 13, 1995
19
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
10-A Third Amendment to Loan Agreement dated as of October
12, 1994 among the Corporation, the Banks identified
therein and Banque Paribas, as Agent for the Banks.
10-B Fourth Amendment to Loan Agreement dated as of
December 19, 1994, among the Corporation, the Banks
identified therein and Banque Paribas, as Agent for
the Banks.
10-C Fourth Amendment to Amended and Restated Loan
Agreement, Consent and Waiver, dated as of November
22, 1994, among FoxMeyer Corporation, FoxMeyer Drug
Company, Merchandise Coordinator Services
Corporation, Harris Wholesale Company, the Lenders
and Issuer referred therein, Citicorp USA, Inc., as
Administrative Agent for the Lenders, and NationsBank
of Texas, N.A. and Banque Paribas, as Co-Agents for
the Lenders.
10-D Second Amendment dated as of November 22, 1994 to
Trade Receivables Purchase and Sale Agreement dated
as of October 29, 1993 among FoxMeyer Corporation,
Corporate Asset Funding Company, Inc., Enterprise
Funding Corporation, Citibank, N.A., NationsBank of
North Carolina, N.A., individually and as Co-Agent,
Citicorp North America, Inc., individually and as
agent, and the Banks listed therein.
10-E Amendment dated October 12, 1994 to the 1993 Stock
Option and Performance Award Plan of the Corporation.
11 Computation of earnings per share of common stock.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10-A
THIRD AMENDMENT AGREEMENT
This Third Amendment Agreement (this Amendment") is made and entered
into as of October 12, 1994, by and among FOXMEYER HEALTH CORPORATION (f/k/a
National Intergroup, Inc.) ("Borrower"), a Delaware corporation, the Banks
identified on the signature pages hereof ("Banks") and BANQUE PARIBAS, a bank
organized under the laws of the Republic of France, as Agent for Banks
("Agent").
A. Pursuant to that certain Loan Agreement dated as of January
13, 1994, by and among Borrower, Banks and Agent, as amended by that certain
First Amendment to Loan Agreement dated as of January 13, 1994, as further
amended by that certain Second Amendment to Loan Agreement dated as of
September 6, 1994 (as the same may be amended, renewed, extended, restated or
otherwise modified from time to time, the "Agreement"), Banks agreed to provide
to Borrower a revolving credit and letter of credit facility in the maximum
aggregate principal amount of $15,000,000.
B. The indebtedness of Borrower to the Banks pursuant to the
Agreement is evidenced by (i) a Promissory Note dated February 22, 1994, in the
maximum original principal amount of $10,000,000 made by Borrower and payable
to the order of Banque Paribas, and (ii) a Promissory Note dated February 22,
1994, in the maximum original principal amount of $5,000,000 made by Borrower
and payable to the order of Credit Lyonnais New York Branch (as amended,
renewed, extended, restated, replaced or supplemented from time to time,
whether by one or more other promissory notes or otherwise and whether payable
to the Banks identified above or their successors or assigns, the "Notes").
C. The Obligations (as such term is defined in the Agreement) are
secured by security interests evidenced and created by that certain Amended and
Restated Pledge and Security Agreement dated as of October 12, 1994, by and
between Borrower and Agent (as the same may be amended, renewed, extended,
restated or otherwise modified from time to time, the "Security Agreement")
presently covering, in part, 4,000,000 shares of common stock of FoxMeyer
Corporation owned by Borrower.
D. Borrower has, concurrently with the effective date of this
Amendment, changed its name from "National Intergroup, Inc." to "FoxMeyer
Health Corporation."
E. Borrower, Agent and Banks desire to amend the Agreement, the
Notes, the Security Agreement and the other Loan Documents to reflect such name
change.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Terms Defined. Unless otherwise defined in this Amendment,
each capitalized term used in this Amendment has the meaning given to such term
in the Agreement (as amended by this Amendment).
<PAGE> 2
2. Amendments to the Loan Documents relating to Name Change.
Effective as of the date hereof, the Agreement, the Notes, the Security
Agreement and the other Loan Documents are amended such that the term "National
Intergroup, Inc.", wherever such word appears in the Loan Documents, shall
instead mean and refer to the term "FoxMeyer Health Corporation". Without
limiting the generality of the foregoing, effective as of the date hereof, the
definition of the term "Borrower" contained in Section 1.1 of the Agreement is
amended and restated to read in its entirety as follows:
"`Borrower' means FoxMeyer Health Corporation, a Delaware corporation."
3. Effect of this Amendment. The Loan Documents, as amended by
this Amendment, shall remain in full force and effect except that any reference
therein to any Loan Document(s) shall be deemed to refer to such Loan
Document(s) as amended by this Amendment.
4. Conditions Precedent. The effectiveness of this Amendment is
subject to each of the following conditions precedent:
4.1 Agent's receipt of a certified copy of the
resolutions of the Board of Directors of Borrower authorizing this
Amendment and the change of the Borrower's name to FoxMeyer Health
Corporation.
4.2 Borrower's execution and/or delivery of (i)
additional financing statements as Agent may request, each in form and
substance satisfactory to Agent and Banks, and (ii) any and all other
agreements, documents and instruments as Agent or Banks may request
relating to the Liens on the Collateral securing the Obligations.
4.3 Agent's receipt of Lien searches in the name of
FoxMeyer Health Corporation in each jurisdiction where Borrower
maintains an office or has Assets, showing no financing statements or
other Lien instruments of record except for Permitted Liens.
4.4 Agent's receipt of evidence satisfactory to Agent
confirming the effectiveness of the change of Borrower's name to
FoxMeyer Health Corporation.
5. Representations and Warranties. Borrower hereby represents
and warrants to Agent and Banks that, as of the date of and after giving effect
to this Amendment, (a) all representations and warranties set forth in Article
V of the Agreement and in Article III of the Security Agreement are true and
correct as if made again on and as of such date (except to the extent that such
representations and warranties were expressly, in the Agreement, made only in
reference to a specific date), (b) no Default or Event of Default has occurred
and is continuing, and (c) the Agreement, the Notes, the Security Agreement and
the other Loan Documents (as amended by this Amendment) are and remain legal,
valid, binding and enforceable obligations of Borrower.
2
<PAGE> 3
6. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE U.S. FEDERAL LAWS.
7. Counterparts. This Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute one agreement,
and any of the parties hereto may execute this Amendment by signing any such
counterpart.
8. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE
AGREEMENT AND THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL
AGREEMENTS BETWEEN AND AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A) BORROWER AND (B)
AGENT OR ANY BANK.
9. Agreement Remains in Effect; No Waiver. Except as expressly
provided herein, all terms and provisions of the Loan Documents shall remain
unchanged and in full force and effect and are hereby ratified and confirmed.
No waiver by Agent or any Bank of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event of Default. No delay or
omission by Agent or any Bank in exercising any power, right or remedy shall
impair such power, right or remedy or be construed as a waiver thereof or an
acquiescence therein, and no single or partial exercise of any such power,
right or remedy shall preclude other or further exercise thereof or the
exercise of any other power, right or remedy under the Agreement, the Loan
Documents or otherwise.
10. Payment of Costs, Fees and Expenses. Borrower shall promptly
pay any and all costs, fees and expenses paid or incurred by Agent incident to
this Amendment (including, without limitation, the fees and expenses of counsel
to Agent).
3
<PAGE> 4
IN WITNESS WHEREOF, Borrower, Agent and Banks have caused this
Amendment to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
--------
FOXMEYER HEALTH CORPORATION,
(f/k/a National Intergroup, Inc.)
By:____________________________
Name:__________________________
Title:_________________________
AGENT:
-----
BANQUE PARIBAS, as Agent for Banks
By:____________________________
Name:__________________________
Title:_________________________
By:___________________________
Name:_________________________
Title:________________________
4
<PAGE> 5
BANKS:
-----
BANQUE PARIBAS
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:___________________________
Name:_________________________
Title:________________________
5
<PAGE> 1
EXHIBIT 10-B
FOURTH AMENDMENT TO LOAN AGREEMENT
This FOURTH AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into as of December 19, 1994, by and among FOXMEYER HEALTH CORPORATION
(f/k/a National Intergroup, Inc.) ("Borrower"), a Delaware corporation, the
Banks identified on the signature pages hereof ("Banks") and BANQUE PARIBAS, a
bank organized under the laws of the Republic of France, as Agent for Banks
("Agent").
A. Pursuant to that certain Loan Agreement dated as of January
13, 1994, by and among Borrower, Banks and Agent, as amended by that certain
(i) First Amendment to Loan Agreement dated as of January 13, 1994, (ii) Second
Amendment to Loan Agreement dated as of September 6, 1994 and (iii) Third
Amendment Agreement dated as of October 12, 1994 (as the same may be amended,
renewed, extended, restated or otherwise modified from time to time, the
"Agreement"), Banks agreed to provide to Borrower a revolving credit and letter
of credit facility in the maximum aggregate principal amount of $15,000,000.
B. The indebtedness of Borrower to the Banks pursuant to the
Agreement is evidenced by (i) a Promissory Note dated February 22, 1994, in the
maximum original principal amount of $10,000,000 made by Borrower and payable
to the order of Banque Paribas, and (ii) a Promissory Note dated February 22,
1994, in the maximum original principal amount of $5,000,000 made by Borrower
and payable to the order of Credit Lyonnais New York Branch (as amended,
renewed, extended, restated, replaced or supplemented from time to time,
whether by one or more other promissory notes or otherwise and whether payable
to the Banks identified above or their successors or assigns, the "Notes").
C. The Obligations (as such term is defined in the Agreement) are
secured by security interests evidenced and created by that certain Amended and
Restated Pledge and Security Agreement dated as of October 12, 1994, by and
between Borrower and Agent (as the same may be amended, renewed, extended,
restated or otherwise modified from time to time, the "Security Agreement")
presently covering, in part, 4,000,000 shares of common stock of FoxMeyer
Corporation owned by Borrower.
D. Borrower has, effective as of October 12, 1994, changed its
name from "National Intergroup, Inc." to "FoxMeyer Health Corporation."
E. Borrower, Agent and Banks desire to amend the Agreement in
certain respects.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Terms Defined. Unless otherwise defined in this Amendment,
each capitalized term used in this Amendment has the meaning given to such term
in the Agreement (as amended by this Amendment).
<PAGE> 2
2. Amendment to the Agreement. Effective as of the date hereof,
subclause (B) of clause (iii) of Section 6.2(c) of the Agreement is amended and
restated to read in its entirety as follows:
"(B) the aggregate amount of such purchases during the term of this
Agreement does not exceed $35,000,000".
3. Effect of this Amendment. The Loan Documents (including,
without limitation, the Agreement as amended by this Amendment) shall remain in
full force and effect except that any reference in any Loan Documents to the
Agreement shall be deemed to refer the Agreement as amended by this Amendment.
4. Conditions Precedent. The effectiveness of this Amendment is
subject to Agent's receipt of a certified copy of the resolutions of the Board
of Directors of Borrower authorizing this Amendment.
5. Representations and Warranties. Borrower hereby represents
and warrants to Agent and Banks that, as of the date of and after giving effect
to this Amendment, (a) all representations and warranties set forth in Article
V of the Agreement and in Article III of the Security Agreement are true and
correct as if made again on and as of such date (except to the extent that such
representations and warranties were expressly, in the Agreement, made only in
reference to a specific date), (b) no Default or Event of Default has occurred
and is continuing, and (c) the Agreement, the Notes, the Security Agreement and
the other Loan Documents (as amended by this Amendment) are and remain legal,
valid, binding and enforceable obligations of Borrower.
6. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE U.S. FEDERAL LAWS.
7. Counterparts. This Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute one agreement,
and any of the parties hereto may execute this Amendment by signing any such
counterpart.
8. NO ORAL AGREEMENTS. THIS AMENDMENT, TOGETHER WITH THE
AGREEMENT AND THE OTHER LOAN DOCUMENTS AS WRITTEN, REPRESENT THE FINAL
AGREEMENTS BETWEEN AND AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A) BORROWER AND (B)
AGENT OR ANY BANK.
2
<PAGE> 3
9. Agreement Remains in Effect; No Waiver. Except as expressly
provided herein, all terms and provisions of the Loan Documents shall remain
unchanged and in full force and effect and are hereby ratified and confirmed.
No waiver by Agent or any Bank of any Default or Event of Default shall be
deemed to be a waiver of any other Default or Event of Default. No delay or
omission by Agent or any Bank in exercising any power, right or remedy shall
impair such power, right or remedy or be construed as a waiver thereof or an
acquiescence therein, and no single or partial exercise of any such power,
right or remedy shall preclude other or further exercise thereof or the
exercise of any other power, right or remedy under the Agreement, the Loan
Documents or otherwise.
10. Payment of Costs, Fees and Expenses. Borrower shall promptly
pay any and all costs, fees and expenses paid or incurred by Agent incident to
this Amendment (including, without limitation, the fees and expenses of counsel
to Agent).
IN WITNESS WHEREOF, Borrower, Agent and Banks have caused this
Amendment to be executed and delivered by their duly authorized officers
effective as of the date first above written.
BORROWER:
FOXMEYER HEALTH CORPORATION,
(f/k/a National Intergroup, Inc.)
By: ______________________________
Name: ______________________________
Title: ______________________________
AGENT:
BANQUE PARIBAS, as Agent for Banks
By:
______________________________
Name: ______________________________
Title: ______________________________
By: ______________________________
Name: ______________________________
Title: ______________________________
3
<PAGE> 4
BANKS:
BANQUE PARIBAS
By: ______________________________
Name: ______________________________
Title: ______________________________
By: ______________________________
Name: ______________________________
Title: ______________________________
CREDIT LYONNAIS NEW YORK BRANCH
By: ______________________________
Name: ______________________________
Title: ______________________________
4
<PAGE> 1
EXHIBIT 10-C
FOURTH AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Fourth Amendment") is dated as of November 22, 1994, among (i) FOXMEYER
CORPORATION, a Delaware corporation ("Borrower"), (ii) FOXMEYER DRUG COMPANY, a
Kansas corporation, MERCHANDISE COORDINATOR SERVICES CORPORATION, a Delaware
corporation, and HARRIS WHOLESALE COMPANY, a Delaware corporation (the
"Operating Subsidiaries"), (iii) the LENDERS and ISSUER referred to therein,
and (iv) CITICORP USA, INC., a Delaware corporation, as Administrative Agent
("Administrative Agent"), and NATIONSBANK OF TEXAS, N.A., a bank organized
under the laws of the United States, and BANQUE PARIBAS, a bank organized under
the laws of the Republic of France, as Co-Agents ("Co-Agents").
WITNESSETH:
WHEREAS, FoxMeyer Corporation ("Old FoxMeyer"), Operating
Subsidiaries, Lenders and Issuer, and Administrative Agent and Co-Agents
entered into an Amended and Restated Loan Agreement dated as of April 29, 1993,
as amended as of October 18, 1993, June 20, 1994 and August 26, 1994 (the "Loan
Agreement"); and on October 12, 1994, Old FoxMeyer was merged into Borrower and
Borrower succeeded to and assumed all of Old FoxMeyer's rights and obligations
under the Loan Agreement;
WHEREAS, Borrower has requested an increase in the aggregate
commitment under the Loan Agreement to $275,000,000 principal amount (including
an increase in the availability of letters of credit to $35,000,000 stated
amount), changes in the interest rates and fees payable and other amendments to
the Loan Agreement;
WHEREAS, the Lenders, Issuer, and Administrative Agent and Co-Agents
have agreed to such increase, changes and other amendments, all upon the terms
and conditions set forth below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, terms are
used herein as defined in the Loan Agreement.
SECTION 2. AMENDMENT OF SECTION 1.2. Section 1.2 of the Loan
Agreement is hereby amended by deleting the definitions of "Aggregate
Commitment," "Applicable LIBOR Margin," "Applicable LIBOR Margin Ratio," "B
Advance," "B Borrowing," "B Borrowing Notice," "B Note," "Base Financial
Statements,"
<PAGE> 2
"Capital Expenditures," "Co-Agent," "Current Assets," "Current Maturities,"
"Default Rate," "Equity Investment," "Funded Debt," "Guaranty Agreement,"
"Interest Expense," "Maximum Aggregate Letter of Credit Amount," "Net Worth",
"NII," "NII Loan," "Permitted Indebtedness," "Permitted Liens," "Phar-Mor
Current Asset Adjustment Amount," "Pro Rata Share," "Revolving Receivables
Purchase Program" and "Termination Date" and inserting the following
definitions (in appropriate alphabetical order):
Aggregate Commitment. Means $275,000,000, subject to
reduction as provided in Section 2.12 (which amount is the aggregate
of the maximum Commitments of all Lenders).
Applicable Coverage Ratio. Means, as of any date, the ratio
of (a)(i) EBIT, plus (ii) amortization and depreciation expense, plus
(iii) the Development Cost Interest Coverage Ratio Adjustment Amount,
of Borrower and the Consolidated Subsidiaries for the 12 month period
ended on such date, to (b) Interest Expense, plus interest income then
being currently received (to the extent such income is netted against
interest charges in the definition of "Interest Expense"), for such 12
month period.
Applicable Facility Fee Percentage. Means one-quarter of one
percent (0.25%) per annum; provided, however, that the Applicable
Facility Fee Percentage shall be subject to reduction or increase on
the first day of each calendar month (each an "Adjustment Date"),
commencing with the first day of the calendar month following the
first delivery of a certificate pursuant to Section 6.3(a)(i), based
on the Applicable Coverage Ratio as shown on the then most recent
calculation thereof delivered pursuant to Section 6.3(a)(i). From and
after each Adjustment Date and to (but not including) the next
succeeding Adjustment Date, the Applicable Facility Fee Percentage
shall be the rate per annum set forth opposite the Applicable Coverage
Ratio below:
<TABLE>
<CAPTION>
Applicable Facility
Fee Percentage Applicable Coverage Ratio
------------------- -------------------------
<S> <C>
0.1750% Greater than 5.00 to 1.00
0.2000% Greater than 4.50 to 1.00, but less than or equal
to 5.00 to 1.00
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
0.2500% Greater than 4.00 to 1.00, but less than or equal
to 4.50 to 1.00
0.3125% Greater than 3.50 to 1.00, but less than or equal
to 4.00 to 1.00
0.3750% Less than or equal to 3.50 to 1.00
</TABLE>
Notwithstanding the foregoing, if no calculation contemplated by Section
6.3(a)(i) is delivered during the month prior to an Adjustment Date, the
Applicable Facility Fee Percentage from and after such Adjustment Date to (but
not including) the next succeeding Adjustment Date as to which such a
calculation is delivered shall be three-eighths of one percent (0.375%) per
annum.
Applicable Letter of Credit Fee Percentage. Means, as of any
date, the rate per annum equal to the Applicable LIBOR Margin as in
effect on such date.
Applicable Leverage Ratio. Means, as of any date, the ratio
of (i) the sum of (A) all consolidated Indebtedness of Borrower and
the Consolidated Subsidiaries (other than obligations under any
Interest Rate Protection Agreements and Permitted Indebtedness
referred to in clause (d) of the definition thereof) as of such date
(or in the case of up to $6,000,000 in principal amount of Permitted
Indebtedness consisting of industrial development revenue bonds and
notes and mortgages, as of the end of the calendar month that includes
such date) plus (B) the aggregate amount paid by purchasers of
Receivables (and property of account debtors securing such
Receivables) or interests therein under the Revolving Receivables
Purchase Program to be recovered from Receivables (and such property)
outstanding as of such date to (ii) the sum of (A) all consolidated
Indebtedness of Borrower and the Consolidated Subsidiaries (other than
obligations under any Interest Rate Protection Agreements and
Permitted Indebtedness referred to in clause (d) of the definition
thereof) as of such date (or in the case of up to $6,000,000 in
principal amount of Permitted Indebtedness consisting of industrial
development revenue bonds and notes and mortgages, as of the end of
the calendar month that includes such date) plus (B) the aggregate
amount paid by purchasers of Receivables (and property of account
debtors securing such Receivables) or interests
3
<PAGE> 4
therein under the Revolving Receivables Purchase Program to be
recovered from Receivables (and such property) outstanding as of such
date plus (C) consolidated Net Worth of Borrower and the Consolidated
Subsidiaries as of the end of the calendar month that includes such
date.
Applicable LIBOR Margin. Means (a) one-half of one percent
(0.50%) per annum; provided, however, that, subject to the penultimate
sentence hereof, the Applicable LIBOR Margin shall be subject to
reduction or increase on the first day of each calendar month (each an
"Effective Date"), commencing with the first day of the calendar month
following the first delivery of a certificate pursuant to Section
6.3(a)(i), based on the Applicable Coverage Ratio as shown on the then
most recent calculation thereof delivered pursuant to Section
6.3(a)(i). From and after each Effective Date and to (but not
including) the next succeeding Effective Date, the Applicable LIBOR
Margin shall be the rate per annum set forth opposite the Applicable
Coverage Ratio below:
<TABLE>
<CAPTION>
Applicable Applicable
LIBOR Margin Coverage Ratio
------------ --------------
<S> <C>
0.325% Greater than 5.00 to 1.00
0.425% Greater than 4.50 to 1.00, but
less than or equal to 5.00 to 1.00
0.500% Greater than 4.00 to 1.00, but
less than or equal to 4.50 to 1.00
0.5625% Greater than 3.50 to 1.00, but
less than or equal to 4.00 to 1.00
0.625% Greater than 3.00 to 1.00, but
less than or equal to 3.50 to 1.00
0.875% Less than or equal to 3.00 to 1.00
</TABLE>
If no calculation contemplated by Section 6.3(a)(i) is delivered
during the month prior to an Effective Date,
4
<PAGE> 5
the Applicable LIBOR Margin from and after such Effective Date to (but
not including) the next succeeding Effective Date as to which such a
calculation is delivered shall be seven-eighths of one percent
(0.875%) per annum. Notwithstanding the foregoing, if on any day the
Applicable Leverage Ratio is greater than 0.50 to 1.00, the Applicable
LIBOR Margin for such day shall be the rate per annum otherwise
provided in this paragraph plus one-eighth of one percent (0.125%) per
annum; provided that the Applicable Leverage Ratio shall be deemed to
be greater than 0.50 to 1.00 for each day during a calendar month as
to which a calculation of the Applicable Leverage Ratio is not
delivered as contemplated by Section 6.3(a)(ii).
B Advance. Means an advance by a Lender to Borrower as part
of a B Borrowing resulting from the auction bidding procedures
described in Section 2.2.
B Borrowing. Means a borrowing consisting of simultaneous B
Advances from each of the Lenders whose offer to make one or more B
Advances as part of such borrowing has been accepted by Borrower under
the auction bidding procedures described in Section 2.2.
B Borrowing Account. Has the meaning set forth in Section
2.2(g).
B Borrowing Notice. Means the request for bids for B
Advances, in the form of Exhibit B hereto, appropriately completed and
executed by Borrower and delivered to Administrative Agent or Lenders
under the auction bidding procedures described in Section 2.2.
B Note. Has the meaning set forth in Section 2.2(g).
Base Financial Statements. Means the Financial Statements of
Borrower and its Consolidated Subsidiaries as of and for the fiscal
year ended March 31, 1994 and the fiscal six months ended September
30, 1994.
Capital Expenditures. Means any expenditure by a Person for
an Asset which will be used in a year or years subsequent to the year
in which such expenditure is made and which Asset is properly
classified, in relevant financial statements of such Person and in
accordance with GAAP, as equipment, real property or improvements,
fixed assets or a similar type of capitalized asset.
Default Rate. Means (a) for all Obligations other than B
Advances a rate per annum equal to the
5
<PAGE> 6
lesser of (i) the Maximum Lawful Rate or (ii) three percent (3%) plus
the interest rate then (at the time of determination of the Default
Rate) applicable to Base Rate Loans pursuant to Section 2.7(c)(i) and
(b) for each B Advance a rate per annum equal to the lesser of (i) the
Maximum Lawful Rate or (ii) three percent (3%) plus the interest rate
stated in the B Note, or recorded in the B Borrowing Account,
evidencing such B Advance.
Development Cost Debt Service Coverage Ratio Adjustment
Amount. Means, as of any date of determination, the aggregate amount
of any reduction of Operating Cash Flow attributable to any write-off
of previously capitalized computer software development costs or any
write-off of the costs of, or loss on the disposition of, replaced
computer software and related hardware; provided that the aggregate
amount of the Development Cost Debt Service Coverage Ratio Adjustment
Amount utilized during any period of 12 months shall not exceed
$5,000,000 (prior to any adjustment for income taxes).
Development Cost Interest Coverage Ratio Adjustment Amount.
Means, as of any date of determination, the aggregate amount of any
reduction of EBIT attributable to any write-off of previously
capitalized computer software development costs or any write-off of
the costs of, or loss on the disposition of, replaced computer
software and related hardware; provided that the aggregate amount of
the Development Cost Interest Coverage Ratio Adjustment Amount
utilized during any period of 12 months shall not exceed $5,000,000
(prior to any adjustment for income taxes).
Fourth Amendment Date. Means the date on which the amendments
to this Agreement provided in the Fourth Amendment to Amended and
Restated Loan Agreement, dated as of November 22, 1994, become
effective in accordance with the terms and conditions thereof.
Funded Debt. Means, as of the date of any determination, the
sum of the following (without duplication): (a) all Indebtedness
evidenced by the Notes or the B Borrowing Account as of such date, (b)
all Indebtedness evidenced by the 7.09% Notes as of such date, (c) all
Indebtedness consisting of Subordinated Debt as of such date, (d) all
Indebtedness which would be classified as "funded debt" or "long-term
debt", including the current portions thereof, on a consolidated
balance sheet of Borrower and the Consolidated Subsidiaries prepared
as of such date in accordance with GAAP, (e) all Indebtedness of
Borrower or any
6
<PAGE> 7
Consolidated Subsidiary having a final maturity (or which is renewable
or extendible at the option of the obligor for a period ending) more
than one year after the date of creation thereof, notwithstanding that
payments in respect thereof are required to be made by the obligor
less than one year after the date of the creation thereof or that any
amount thereof is at the time included also in Current Liabilities of
such obligor, (f) all Indebtedness of Borrower or any Consolidated
Subsidiary outstanding under a revolving credit or similar agreement
providing for borrowings (and renewals and extensions thereof) over a
period of more than one year, notwithstanding that any such
Indebtedness is created within one year of the expiration of such
agreement, (g) the present value (discounted at the implicit rate, if
known, or ten percent (10%) per annum otherwise) of all obligations in
respect of Capital Leases of Borrower or any Consolidated Subsidiary
and (h) Redeemable Capital Stock of Borrower valued at the greater of
its voluntary or involuntary maximum fixed repurchase or redemption
price plus accrued and unpaid dividends. For purposes hereof, the
"maximum fixed repurchase or redemption price" of any Redeemable
Capital Stock which does not have a fixed repurchase or redemption
price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased or redeemed on any date on which Funded Debt shall be
required to be determined, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock,
such fair market value to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
Guaranty Agreement. Means a guaranty agreement, substantially
in the form of Exhibit C hereto, as amended as contemplated by the
Fourth Amendment hereto.
Healthcare Connect Subsidiaries. Means Healthcare Connect,
Inc., a Delaware corporation, and its wholly owned Subsidiaries, HCPP
Holdings, Inc., Health Care Pharmacy Providers, Inc., US HealthData
Interchange, Inc. and Scrip Card Enterprises, Inc., and any future
wholly owned Subsidiaries of Healthcare Connect, Inc.
Interest Expense. Means, for any period, the interest charges
paid or accrued (without duplication) during such period (including
imputed interest on Capital Lease obligations and amortization of debt
discount, but excluding amortization of other debt expense, and net of
interest income being currently received in cash during
7
<PAGE> 8
such period) on the Indebtedness of Borrower and the Consolidated
Subsidiaries.
Inventory Amount. Means, as of the date of any determination,
the amount of the Inventory of Borrower or any Consolidated
Subsidiary, net of all related allowances and reserves, as determined
in accordance with GAAP, but shall exclude (to the extent otherwise
included therein): (a) all raw materials, (b) all work in process,
(c) all Inventory as to which Borrower or such Consolidated Subsidiary
(as applicable) does not have the full and unqualified right (except
for the limitations on such right permitted by Section 6.2(n)) to
assign and grant a security interest therein as security for the
Obligations, and (d) all Inventory as to which Borrower or such
Consolidated Subsidiary does not have lawful and absolute title,
subject only to Permitted Liens.
Maximum Aggregate Letter of Credit Amount. Means $35,000,000.
Minority Equity Investment. Means any equity investment in
any entity that is engaged principally in a business related to that
of Borrower and the Consolidated Subsidiaries, provided that such
investment, together with all prior investments in such entity, does
not constitute more than fifty percent (50%) of the equity Securities
of such entity.
Net Worth. Means, as of the date of any determination, the
remainder of (a) the total stockholder's equity (including capital
stock, additional paid-in capital and retained earnings after
deducting treasury stock) which would appear on a consolidated balance
sheet of Borrower and the Consolidated Subsidiaries prepared as of
such date in accordance with GAAP, minus (b) to the extent not
deducted therefrom, the aggregate amount of all Redeemable Capital
Stock, minus (c) the aggregate amount of gain from the sale of capital
assets, gain from any write-up of assets and any other non-operating
or extraordinary gain reflected in total stockholder's equity shown on
such balance sheet; provided, however, that:
(i) for purposes of the references to Net Worth
in the Solvency Certificate referred to in Section 4.1(h) or
required to be delivered on the Fourth Amendment Date and the
minimum Net Worth requirement of each Operating Subsidiary set
forth in the second sentence of Section 6.2(e), Net Worth
shall be determined without subtraction of the items described
in clause (c) above and based upon the
8
<PAGE> 9
financial condition of such Operating Subsidiary only; and
(ii) for purposes of the ratio calculated pursuant
to Section 6.2(i) and the Applicable Leverage Ratio, Net Worth
shall be determined without subtraction of the items described
in clause (c) above.
NII. Means FoxMeyer Health Corporation, a Delaware
corporation, formerly called National Intergroup, Inc.
NII Loan. Means one or more loans in the maximum aggregate
principal amount of $30,000,000 at any time outstanding under the NII
Loan Agreement.
Permitted Indebtedness. Means (a) the Obligations, (b) the
existing Indebtedness, other than the 7.09% Notes and the 7.09% Note
Guaranties, expressly identified on Schedule 2 hereto (including
renewals or extensions thereof, but excluding increases thereof except
as may otherwise be permitted), (c) Guaranties of Indebtedness of
customers of Borrower or an Operating Subsidiary by Borrower or such
Operating Subsidiary, provided such Guaranties constitute Permitted
Customer Advances, (d) agreements entered into in the ordinary course
of business by Borrower or an Operating Subsidiary to repurchase at a
discounted price Inventory sold to customers of Borrower or such
Operating Subsidiary, (e) obligations evidenced by the Intercompany
Notes, (f) accounts payable and other accruals incurred by Borrower or
any Consolidated Subsidiary and payable or owing to another Person who
is Borrower or any Consolidated Subsidiary as a result of the cash
management system of Borrower and its Consolidated Subsidiaries, (g)
obligations evidenced by any Interest Rate Protection Agreement in
respect of the Obligations or the 7.09% Notes, (h) any Indebtedness
which is expressly permitted pursuant to clause (iv) of Section
6.2(l), (i) Indebtedness consisting of the 7.09% Notes and the 7.09%
Note Guaranties, (j) Indebtedness consisting of Redeemable Capital
Stock, provided such stock is Preferred Stock which does not provide
for mandatory repurchase or redemption prior to the fifth (5th)
anniversary of the date of issuance thereof, (k) Subordinated Debt
incurred in the aggregate principal amount not to exceed $200,000,000,
provided that at the time of any incurrence of such Indebtedness and
after giving effect thereto and considering facts and circumstances
then existing, no Potential Default or Event of Default exists or will
occur or may reasonably
9
<PAGE> 10
be expected to occur, and (l) up to $10,000,000 of Indebtedness
consisting of (i) Capital Leases or (ii) purchase money Indebtedness
secured by Liens permitted by clause (h) of the definition of
"Permitted Liens."
Permitted Liens. Means, with respect to any Asset, (a) any
Lien created pursuant to Section 3.2; (b) pledges or deposits made in
the ordinary course of business to secure payment of worker's
compensation insurance (or to participate in any fund in connection
with worker's compensation insurance), unemployment insurance or
social security programs; (c) Liens imposed by mandatory provisions of
law and arising in the ordinary course of business (such as
materialmen's, mechanics', landlord's and warehousemen's Liens and
other like Liens) securing indebtedness whose payment is not yet due;
(d) Liens for taxes, assessments and governmental charges or levies
imposed upon a Person or upon such Person's income or profits or
property if the same are not yet due and payable; (e) the Liens
referred to in clauses (A), (B) and (C) immediately below if and only
if (i) the amount, applicability or validity thereof is currently (at
the time in question) being contested in good faith by appropriate
action promptly and diligently conducted and adequate cash reserves
(to the extent required by GAAP) have been set aside therefor, (ii)
levy and execution thereon have been stayed and continue to be stayed
and (iii) they do not in the aggregate materially detract from the
value of the property of, or materially impair the use of such
property in the business of, Borrower, any Operating Subsidiary or
Borrower and the Consolidated Subsidiaries taken as a whole: (A)
claims and Liens for taxes due and payable, (B) claims and Liens upon,
and defects of title to, personal property or other legal process
prior to adjudication of a dispute on the merits and (C) adverse
judgments on appeal; (f) Liens arising from good faith deposits in
connection with tenders, leases, real estate bids or contracts (other
than contracts involving the borrowing of money), pledges or deposits
to secure public or statutory obligations and deposits to secure (or
in lieu of) surety, or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar
charges; (g) encumbrances consisting of zoning restrictions,
restrictive covenants, encroachments, protrusions, easements or other
restrictions on or affecting the use of real property or which would
appear on a survey or title report covering such property, provided
that such items do not in the aggregate materially detract from the
value of any material property of the Person in question or materially
impair the use of such material property in
10
<PAGE> 11
such Person's business; (h) Liens consisting of Capital Leases or
solely securing purchase money Indebtedness, in each case incurred in
the ordinary course of business for the purchase of computers, trucks
and other equipment used in the ordinary course of business, provided
that each such Lien is limited to the equipment so financed; and (i)
Liens, if any, described on Schedule 2 hereto; provided, however, that
none of the aforesaid Permitted Liens (1) may attach or relate to any
Intercompany Note or any capital stock of any Consolidated Subsidiary
or (2) arise under or be required by ERISA.
Pro Rata Share. Means, with respect to each Lender, as of the
date of any determination, such Lender's proportionate share of the
Aggregate Commitment (and the A Advances and Letters of Credit made
and issued, respectively, thereunder). As of the Fourth Amendment
Date, the Pro Rata Share of each Lender as to the Aggregate Commitment
(and the A Advances and Letters of Credit made and issued,
respectively, thereunder) is set forth on Schedule l hereto.
Receivables Amount. Means, as of the date of any
determination, the amount of the Receivables of Borrower or any
Consolidated Subsidiary arising in the ordinary course of Borrower's
or such Consolidated Subsidiary's (as applicable) business, net of all
related allowances and reserves, as determined in accordance with
GAAP, but shall exclude (to the extent otherwise included therein):
(a) all Receivables that are not valid and enforceable
obligations of the account debtor payable in U.S. dollars;
(b) all Receivables unpaid for more than 150 days after
the invoiced due date for such Receivables (other than Receivables as
to which a good faith dispute exists with the account debtors beyond
such 150 day period);
(c) all Receivables as to which Borrower or such
Consolidated Subsidiary (as applicable) does not have lawful and
absolute title, subject only to the Revolving Receivables Purchase
Program or Permitted Liens;
(d) all Receivables as to which Borrower or such
Consolidated Subsidiary (as applicable) does not have the full and
unqualified right (except for the limitations on such right permitted
by Section 6.2(n)) to
11
<PAGE> 12
assign and grant a security interest therein as security for the
Obligations;
(e) the Phar-Mor Receivables; and all other Receivables
owed by account debtors which are not Solvent or which are seeking
relief, or are the subject of a case or proceeding, under any Debtor
Relief Laws, except for Receivables owed by Phar-Mor, Inc. (other than
the Phar-Mor Receivables) arising prior to the effectiveness of the
plan of reorganization in the Phar-Mor Bankruptcy so long as such
Receivables satisfy the requirements of Section 6.2(t); and
(f) all Receivables owing by officers or employees of
Borrower or any Consolidated Subsidiary, or owing by any other Person
in which any such entity has an equity interest if the amount owed by
such other Person are not incurred in the ordinary course of business
and all Receivables owing by an Affiliate of Borrower or any
Consolidated Subsidiary, to the extent such Receivables exceed
$1,000,000 in amount at any time outstanding;
provided that, as long as the time of termination of reinvestment by
purchasers under the Revolving Receivables Purchase Program shall not
have occurred, the amount of Receivables outstanding and purchased
under the Revolving Receivables Purchase Program shall be deemed to be
included in the Receivables Amount.
Revolving Receivables Purchase Program. Means a revolving
trade receivables purchase facility involving assignments of or
security interests in Receivables (and property of account debtors
securing such Receivables) under one or more agreements for limited
recourse sales by Borrower and any and all of the Operating
Subsidiaries for cash of such Receivables (and property) or interests
therein, provided that (i) such agreements do not create any interest
in any Asset other than Receivables (and such property), (ii) the
aggregate principal amount paid by the purchasers of Receivables (and
property of account debtors securing such Receivables) or interests
therein to be recovered from Receivables (and such property) shall not
exceed at any time outstanding $200,000,000 and (iii) from and after
the time of termination of reinvestment by purchasers of Receivables
or interests therein under such facility (whether because of an event
of termination, Borrower's election or otherwise), there shall be no
Lien on, or other restrictions on payment to Borrower or any of the
Operating Subsidiaries of the collections or other proceeds of, the
interest of Borrower or any of the Operating Subsidiaries in
12
<PAGE> 13
Receivables to the extent Receivables or an interest therein has not
been sold under such facility.
Subordinated Debt. Means unsecured Indebtedness of Borrower
(a) in respect of which Borrower is directly obligated and none of the
Operating Subsidiaries or other Consolidated Subsidiaries is directly,
contingently or otherwise obligated (including by way of a Guaranty),
(b) which has a final maturity and no scheduled redemptions or other
payments prior to the expiration of one year after the Termination
Date and (c) which is subordinated in right of payment to the prior
payment of the Obligations of Borrower on terms, and pursuant to
documentation containing other terms (including interest, covenants
and events of default), in form and substance satisfactory to
Administrative Agent in its discretion.
Termination Date. Means December 31, 1997; provided, however,
that such date may be extended from time to time by subsequent written
agreement (if any) among Borrower and Lenders; provided, further,
however, that Lenders shall not have any obligation to agree to any
such extension.
SECTION 3. AMENDMENT OF SECTION 2.2. Section 2.2 of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
2.2 B ADVANCES.
(a) Procedure. Upon the terms and subject to the
conditions set forth in this Agreement, each Lender agrees, severally
and not jointly, that Borrower may avail itself of B Advances under
this Section 2.2 from time to time on any Business Day during the
period from the date hereof until the date occurring 30 days prior to
the Termination Date in the manner set forth below; provided that,
following the making of each B Advance, the aggregate principal amount
of all Loans made by all Lenders under Section 2.1 and this Section
2.2 and outstanding plus the aggregate of all Letters of Credit
Outstanding may not at any time exceed the Aggregate Commitment
(computed without regard to any B Reduction).
(b) Administrative Agent Auction.
(i) Borrower may request a B Borrowing under this
Section 2.2(b) by delivering to Administrative Agent, by
telecopier or telefax, confirmed immediately in writing, a B
Borrowing Notice, referring to this Section 2.2(b) and
13
<PAGE> 14
specifying the date and aggregate amount of the proposed B
Borrowing, the maturity date for repayment of the B Advance to
be made as part of such B Borrowing (which maturity date shall
be a date occurring 14, 21, 30, 60, 90 or 180 days after the
date of such B Borrowing, but not later than the Termination
Date), the interest payment date or dates relating thereto,
and any other terms to be applicable to such B Borrowing, not
later than 1:00 P.M. (New York, New York time) at least two
Business Days prior to the date of the proposed B Borrowing.
Administrative Agent shall in turn promptly notify each Lender
of each request for such B Borrowing received by it from
Borrower by sending such Lender a copy of the related B
Borrowing Notice.
(ii) Each Lender may, if, in its sole discretion,
it elects to do so, irrevocably offer to make one or more B
Advances to Borrower as part of such proposed B Borrowing at a
fixed rate or rates of interest specified by such Lender in
its sole discretion (but in no event at a rate in excess of
the Maximum Lawful Rate), by notifying Administrative Agent
(which shall give prompt notice thereof to Borrower), before
10:00 A.M. (New York, New York time) on the date of such
proposed B Borrowing, of the minimum amount and maximum amount
of each B Advance which such Lender would be willing to make
as part of such proposed B Borrowing (which amounts may,
subject to the proviso to the first sentence of Section
2.2(a), exceed such Lender's Commitment) and the rate or rates
of interest therefor; provided that if Administrative Agent in
its capacity as a Lender shall, in its sole discretion, elect
to make any such offer, it shall notify Borrower of such offer
before 9:30 A.M. (New York, New York time) on the date on
which notice of such election is to be given to Administrative
Agent by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify Administrative
Agent, before 10:00 A.M. (New York, New York time) on the date
on which notice of such election is to be given to the
Administrative Agent by the other Lenders, and such Lender
shall not be obligated to, and shall not, make any B Advance
as part of such B Borrowing; provided that the failure by any
Lender to give such notice shall not cause such Lender to be
obligated to make any B Advance as part of such proposed B
Borrowing.
14
<PAGE> 15
(iii) Borrower shall, in turn, before 11:00 A.M.
(New York, New York time) on the date of such proposed B
Borrowing, either:
(x) cancel such B Borrowing by giving
Administrative Agent notice to that effect, or
(y) accept one or more of the offers
made by any Lender or Lenders pursuant to paragraph
(ii) above, in its sole discretion, by giving notice
to Administrative Agent of the amount of each B
Advance (which amount shall be equal to or greater
than the minimum amount, and equal to or less than
the maximum amount, notified to Borr ower by
Administrative Agent on behalf of such Lender for
such B Advance pursuant to paragraph (ii) above) to
be made by each Lender as part of such B Borrowing,
and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving
Administrative Agent notice to that effect.
(iv) If Borrower notifies Administrative Agent
that such B Borrowing is canceled pursuant to paragraph
(iii)(x) above, Administrative Agent shall give prompt notice
thereof to Lenders, and such B Borrowing shall not be made.
(v) If Borrower accepts one or more of the offers
made by any Lender or Lenders pursuant to paragraph (iii)(y)
above, Administrative Agent shall in turn promptly notify (A)
each Lender that has made an offer as described in paragraph
(ii) above, of the date and aggregate amount of such B
Borrowing and whether or not any offer or offers made by such
Lender pursuant to paragraph (ii) above have been accepted by
the Borrower, (B) each Lender that is to make a B Advance as
part of such B Borrowing, of the amount of each B Advance to
be made by such Lender as part of such B Borrowing, and (C)
each Lender that is to make a B Advance as part of such B
Borrowing, as to whether such B Borrowing conforms to the
requirements of Section 2.2(a). Each Lender that is to make a
B Advance as part of such B Borrowing shall, before 1:00 P.M.
(New York, New York time) on the date of such B Borrowing
specified in the notice received from Administrative Agent
pursuant to clause (A) of the preceding sentence (provided
such Lender shall have received any required B Note and a
favorable notice from Administrative Agent pursuant to clause
(C) of the
15
<PAGE> 16
preceding sentence), make available to Administrative Agent at
Citibank, 399 Park Avenue, New York, New York 10043 such
Lender's portion of such B Borrowing, in same day funds. Upon
fulfillment of the applicable conditions set forth in Article
IV and after receipt by Administrative Agent of such funds,
Administrative Agent will make such funds available to
Borrower at Administrative Agent's aforesaid address.
Promptly after each B Borrowing, Administrative Agent will
notify each Lender of the amount of the B Borrowing, the
consequent B Reduction and the dates upon which such B
Reduction commenced and will terminate.
(c) Borrower Auction.
(i) Borrower may request a B Borrowing under this
Section 2.2(c) by delivering to Lenders (with a copy to
Administrative Agent), by telecopier or telefax (confirmed
immediately in writing to the Administrative Agent), a B
Borrowing Notice, referring to this Section 2.2(c) and
specifying the date and aggregate amount of the proposed B
Borrowing, the maturity date for repayment of the B Advance to
be made as part of such B Borrowing (which maturity date shall
be a date occurring not less than one nor more than 29 days
after the date of such B Borrowing, but not later than the
Termination Date), the interest payment date or dates relating
thereto, and any other terms to be applicable to such B
Borrowing, not later than 1:00 P.M. (New York, New York time)
at least two Business Days prior to the date of the proposed B
Borrowing. Borrower shall not notify a Lender of such
proposed B Borrowing if Borrower and Administrative Agent
shall have received notice from such Lender that it elects not
to be so notified.
(ii) Each Lender so notified may, if, in its sole
discretion, it elects to do so, irrevocably offer to make one
or more B Advances to Borrower as part of such proposed B
Borrowing at a fixed rate or rates of interest (and, if
different from that requested by Borrower, a maturity date or
maturity dates therefor not less than one nor more than 29
days after the date of such B Borrowing) specified by such
Lender in its sole discretion (but in no event at a rate in
excess of the Maximum Lawful Rate), by notifying Borrower
(which shall give prompt notice thereof to Administrative
Agent), before 10:00 A.M. (New York, New York time) on the
date of such proposed B Borrowing, of the minimum
16
<PAGE> 17
amount and maximum amount of each B Advance which such Lender
would be willing to make as part of such proposed B Borrowing
(which amounts may, subject to the proviso to the first
sentence of Section 2.2(a), exceed such Lender's Commitment)
and the rate or rates of interest therefor (and such maturity
date or maturity dates). If any Lender so notified shall
elect not to make such an offer, such Lender shall so notify
Borrower before 10:00 A.M. (New York, New York time) on the
date on which notice of such election is to be given to
Borrower by the other Lenders so notified, and such Lender
shall not be obligated to, and shall not, make any B Advance
as part of such B Borrowing; provided that the failure by any
Lender to give such notice shall not cause such Lender to be
obligated to make any B Advance as part of such proposed B
Borrowing.
(iii) Borrower shall, in turn, before 11:00 A.M.
(New York, New York time) on the date of such proposed B
Borrowing, either:
(x) cancel such B Borrowing by giving
the Lenders so notified and Administrative Agent
notice to that effect, or
(y) accept one or more of the offers
made by any Lender or Lenders pursuant to paragraph
(ii) above, in its sole discretion, by giving notice
to such Lender or Lenders and Administrative Agent of
the amount of (and, if a different maturity date has
been offered pursuant to paragraph (ii) above, the
maturity date accepted for) each B Advance (which
amount shall be equal to or greater than the minimum
amount, and equal to or less than the maximum amount,
notified to Borrower by such Lender or Lenders for
such B Advance pursuant to paragraph (ii) above) to
be made by each Lender as part of such B Borrowing,
and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving the
Lenders so notified and Administrative Agent notice
to that effect.
(iv) If Borrower notifies the Lenders so notified
and Administrative Agent that such B Borrowing is canceled
pursuant to paragraph (iii)(x) above, such B Borrowing shall
not be made.
17
<PAGE> 18
(v) If Borrower accepts one or more of the offers
made by any Lender or Lenders pursuant to paragraph (iii)(y)
above, Administrative Agent shall in turn promptly notify each
Lender that is to make a B Advance as part of such B Borrowing
as to whether such B Borrowing conforms to the requirements of
Section 2.2(a). Upon fulfillment of the applicable conditions
set forth in Article IV, each Lender that is to make a B
Advance as part of such B Borrowing shall, before 1:00 P.M.
(New York, New York time) on the date of such B Borrowing
(provided such Lender shall have received any required B Note
and a favorable notice from Administrative Agent pursuant to
the preceding sentence), make available to Borrower such
Lender's portion of such B Borrowing, in same day funds, by
credit to such bank account as Borrower may designate.
Promptly after each B Borrowing, Administrative Agent will
notify each Lender of the amount of the B Borrowing, the
consequent B Reduction and the dates upon which such B
Reduction commenced and will terminate.
(d) Money Market Auction.
(i) Borrower may request a B Borrowing under this
Section 2.2(d) by telephone notice to Lenders and
Administrative Agent, referring to this Section 2.2(d) and
specifying the aggregate amount of the proposed B Borrowing
and the maturity date for repayment of the B Advance to be
made as part of such B Borrowing (which maturity date shall be
a date occurring not less than one nor more than four days
after the date of such B Borrowing), not later than 12:00 noon
(New York, New York time) on the date of the proposed B
Borrowing. Borrower shall not notify a Lender of such
proposed B Borrowing if Borrower and Administrative Agent
shall have received notice from such Lender that it elects not
to be so notified.
(ii) Each Lender so notified may, if, in its sole
discretion, it elects to do so, irrevocably offer to make one
or more B Advances to Borrower as part of such proposed B
Borrowing at a fixed rate of interest specified by such Lender
in its sole discretion (but in no event at a rate in excess of
the Maximum Lawful Rate), by telephone notice to Borrower
(which shall give prompt telephone notice thereof to
Administrative Agent), before 12:30 P.M. (New York, New York
time) on the date of such proposed B Borrowing, of the minimum
amount and
18
<PAGE> 19
maximum amount of each B Advance which such Lender would be
willing to make as part of such proposed B Borrowing (which
amounts may, subject to the proviso to the first sentence of
Section 2.2(a), exceed such Lender's Commitment) and the rate
of interest therefor. If any Lender so notified shall elect
not to make such an offer, such Lender shall so notify
Borrower by telephone, before 12:30 P.M. (New York, New York
time) on such date, and such Lender shall not be obligated to,
and shall not, make any B Advance as part of such B Borrowing;
provided that the failure by any Lender to give such notice
shall not cause such Lender to be obligated to make any B
Advance as part of such proposed B Borrowing.
(iii) Borrower shall, in turn, before 1:00 P.M.
(New York, New York time) on the date of such proposed B
Borrowing, either:
(x) cancel such B Borrowing by giving
the Lenders so notified and Administrative Agent
notice to that effect, or
(y) accept one or more of the offers
made by any Lender or Lenders pursuant to paragraph
(ii) above, in its sole discretion, by giving notice
(which may be by telephone, confirmed immediately by
telecopier or telefax and in writing) to such Lender
or Lenders and Administrative Agent of the maturity
date specified pursuant to paragraph (i) above and
the amount of each B Advance (which amount shall be
equal to or greater than the minimum amount, and
equal to or less than the maximum amount, notified to
Borrower by such Lender or Lenders for such B Advance
pursuant to paragraph (ii) above) to be made by each
Lender as part of such B Borrowing, and reject any
remaining offers made by Lenders pursuant to
paragraph (ii) above by giving the Lenders so
notified and Administrative Agent notice to that
effect.
(iv) If Borrower notifies the Lenders so notified
and Administrative Agent that such B Borrowing is canceled
pursuant to paragraph (iii)(x) above, such B Borrowing shall
not be made.
(v) If Borrower accepts one or more of the offers
made by any Lender or Lenders pursuant to paragraph (iii)(y)
above, Borrower shall be deemed to have provided such Lender
or Lenders with the
19
<PAGE> 20
certifications set forth in paragraphs (c) through (g) of the
form of B Borrowing Notice as of the date of the B Borrowing,
and Administrative Agent shall in turn promptly notify each
Lender that is to make a B Advance as part of such B Borrowing
as to whether such B Borrowing conforms to the requirements of
Section 2.2(a). Upon fulfillment of the applicable conditions
set forth in Article IV, each Lender that is to make a B
Advance as part of such B Borrowing shall, before 3:00 P.M.
(New York, New York time) on the date of such B Borrowing
(provided such Lender shall have received the confirmation by
telecopy or telefax required by paragraph (iii)(y) above, any
required B Note and a favorable notice from Administrative
Agent pursuant to the preceding sentence), make available to
Borrower such Lender's portion of such B Borrowing, in same
day funds, by credit to such bank account as Borrower may
designate. Promptly after each B Borrowing, Administrative
Agent will notify each Lender of the amount of the B
Borrowing, the consequent B Reduction and the dates upon which
such B Reduction commenced and will terminate.
(e) Multiples. Each B Borrowing shall be in an aggregate
amount not less than $1,000,000 or an integral multiple of $100,000 in
excess thereof and, following the making of such B Borrowing, Borrower
shall be in compliance with the limitation set forth in the proviso to
the first sentence of subsection (a) above.
(f) Availability. Within the limits and on the
conditions set forth in this Section 2.2, Borrower may from time to
time borrow under this Section 2.2, repay or prepay pursuant to
subsection (g) below, and reborrow under this Section 2.2; provided
that not more than ten B Borrowings may be outstanding at any time
(for which purpose B Advances made on the same date, but having
different maturities, shall be deemed to be separate B Borrowings).
(g) B Notes; Other Evidence of B Borrowings. Unless a
Lender provides Borrower and Administrative Agent with notice to the
contrary, each B Advance by such Lender shall be evidenced by a
promissory note executed by Borrower and payable to the order of such
Lender, substantially in the form of Exhibit G hereto (as amended,
renewed, extended, restated, replaced, substituted, supplemented or
otherwise modified from time to time, individually, a "B Note" and
collectively, the "B Notes"). Each B Advance not evidenced by a B
Note shall be evidenced by an account maintained by the Lender
20
<PAGE> 21
making such B Advance in accordance with its usual practice, which
shall include the date of the B Advance, the maturity date of the B
Advance and the amount of principal and interest payable and paid to
such Lender from time to time in respect of such B Advance. In
addition, the Administrative Agent shall maintain a control account,
with subsidiary accounts for each Lender (the "B Borrowing Account"),
which shall also evidence the B Advances, in which the dates, amounts
and maturities of the B Advances, the interest rates payable in
respect of the B Advances and sums received in respect of the B
Advances shall be recorded; and, except in the case of B Advances
evidenced by B Notes, the entries made in the B Borrowing Account
shall be conclusive and binding in the absence of manifest error.
Borrower shall repay to Administrative Agent for the account of each
Lender which has made a B Advance (or its assignee pursuant to Section
9.6(g)), or each other holder of a B Note, on the maturity date of
each B Advance (such maturity date being that specified by Borrower
for repayment of such B Advance in the related B Borrowing Notice or
acceptance delivered pursuant to subsection (b)(i), (c)(i) (or
(c)(iii) where a Lender specifies a maturity pursuant to subsection
(c)(ii) above that is accepted by Borrower) or (d)(iii) above and
provided in the B Note or the B Borrowing Account evidencing such B
Advance), the then unpaid amount of such B Advance. Borrower shall
have no right to prepay any principal amount of any B Advance unless,
and then only on the terms specified by Borrower for such B Advance in
the related B Borrowing Notice delivered pursuant to subsection (b)(i)
or (c)(i) above.
(h) Interest. Borrower shall pay interest on the unpaid
principal amount of each B Advance from the date of such B Advance to
the date the principal amount of such B Advance is repaid in full, at
the rate of interest for such B Advance specified by Lender making
such B Advance in its notice with respect thereto delivered pursuant
to subsection (b)(ii), (c)(ii) or d(ii) above, in all cases subject to
Section 2.7(d), payable on the interest payment date or dates
specified by Borrower for such B Advance in the related B Borrowing
Notice delivered pursuant to subsection (b)(i) or (c)(i) above, as
provided in the B Note or the B Borrowing Account evidencing such B
Advance, or on the maturity date of such B Advance in the case of B
Advances pursuant to subsection (d) above.
SECTION 4. AMENDMENT OF SECTION 2.4. Section 2.4 of the Loan
Agreement is hereby amended by (a) deleting the parenthetical phrase in clause
(i) of subsection (a) thereof
21
<PAGE> 22
and (b) deleting the time "12:00 noon" where it first appears therein and
substituting therefor the time "12:30 P.M."
SECTION 5. AMENDMENT OF SECTION 2.7(B). Section 2.7(b) of the Loan
Agreement is hereby amended by deleting the period at the end thereof and
inserting in place thereof the following:
; provided that any interest payable pursuant to the last sentence of
the definition of "Applicable LIBOR Margin" shall be payable (i) on
the last day of the calendar month immediately following the calendar
month containing days in respect of which such interest accrues and
(ii) at maturity.
SECTION 6. AMENDMENT OF SECTION 2.8. Section 2.8 of the Loan
Agreement is here by amended by deleting subsections (d), (e) and (f) in their
entirety and inserting in place thereof the following:
(d) Facility Fee. Borrower shall pay to Administrative
Agent, for distribution to all Lenders (including Citicorp) in
accordance with their respective Pro Rata Shares of the Aggregate
Commitment, on (i) the last day of each calendar quarter during the
term of this Agreement (commencing with the first of such dates to
occur after the Fourth Amendment Date) and (ii) if such date falls on
other than the last day of a calendar quarter, the Termination Date, a
facility fee which shall accrue at the rate of the Applicable Facility
Fee Percentage from time to time in effect on the Aggregate Commitment
in existence during such calendar quarter (or, with respect to the
first facility fee payable pursuant to clause (i) preceding, during
the period from the Fourth Amendment Date to the last day of the
calendar quarter during which the Fourth Amendment Date occurred, or,
with respect to the facility fee payable pursuant to clause (ii)
preceding, during the period from the last day of the immediately
preceding calendar quarter to the payment date).
(e) Letter of Credit Fees. Borrower shall pay the Issuer
(for its own account) with respect to each Letter of Credit, on the
date of Issuance of such Letter of Credit, the then standard issuance,
opening or similar charge of such Issuer. In addition, Borrower shall
pay to Administrative Agent a Letter of Credit fee which shall accrue
at the rate of the Applicable Letter of Credit Fee Percentage from
time to time in effect on the aggregate undrawn face amount of all
Letters of Credit outstanding from time to time. Such fee shall be
payable in arrears (i) on the last day of each calendar quarter
22
<PAGE> 23
during the term of this Agreement (commencing on the first of such
days to occur after the Fourth Amendment Date) and (ii) if such date
falls on other than the last day of a calendar quarter, the
Termination Date. Such fee shall be distributed as follows: (i) to
the Issuer with respect to each Letter of Credit, the portion of such
fee that accrued at the rate of one-eighth of one percent (0.125%) per
annum and (ii) to Lenders (including such Issuer), the balance of such
fee in accordance with their respective Pro Rata Shares of the
Aggregate Commitment.
(f) Auction Fee. For each auction commenced pursuant to
Section 2.2(b), Borrower shall pay to Administrative Agent for its own
account an auction fee equal to the lesser of (i) $300 times the
number of Lenders (including Citicorp) who submit offers or (ii)
$2,500, payable at the earlier of the date of the B Borrowing
resulting therefrom or the date Borrower gives notice of cancellation
pursuant to Section 2.2(b)(iv).
SECTION 7. AMENDMENT OF SECTION 3.3. Section 3.3 of the Loan
Agreement is hereby amended by deleting the word "existence" wherever it
appears therein and inserting in place thereof the phrase "creation or
acquisition."
SECTION 8. AMENDMENT OF SECTION 4.2(D). Section 4.2(d) of the Loan
Agreement is hereby amended by deleting the last sentence thereof and inserting
in place thereof the following:
With respect to any B Advance, Borrower shall have delivered to
Administrative Agent and the Lenders (to the extent required by
Section 2.2) the B Borrowing Notice relating thereto, appropriately
completed and executed by Borrower and in form and substance
satisfactory to Administrative Agent, and, if required by Section 2.2,
a B Note payable to the order of the Lender for such B Advances in a
principal amount equal to the principal amount of the B Advance to be
evidenced thereby and otherwise on such terms as were agreed to for
such B Advance in accordance with Section 2.2.
The Loan Agreement is further amended to restate Exhibit B hereto in its
entirety to read as set forth on Schedule I hereto.
SECTION 9. AMENDMENT OF SECTION 6.2(D). Section 6.2(d) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
23
<PAGE> 24
(d) Working Capital Borrowing Base. Borrower shall not
permit, as of the last day of any calendar month, (i) the product of
1.85 times the sum of (A) all consolidated Indebtedness of Borrower
and the Consolidated Subsidiaries (other than obligations under any
Interest Rate Protection Agreements and Permitted Indebtedness
referred to in clause (d) of the definition thereof) as of such day
plus (B) the aggregate amount paid by purchasers of Receivables (and
property of account debtors securing such Receivables) or interests
therein under the Revolving Receivables Purchase Program to be
recovered from Receivables (and such property) outstanding as of such
day, to exceed (ii) the sum of the Receivables Amount and the
Inventory Amount as of such day; provided that compliance with this
Section 6.2(d) shall not be required as of the last day of any
calendar month if at all times during such month the Applicable
Leverage Ratio shall be equal to or less than 0.50 to 1.00.
SECTION 10. AMENDMENT OF SECTION 6.2(F). Section 6.2(f) of the Loan
Agreement is hereby amended by inserting after the word "Amount" in clause (B)
thereof the following: "plus (C) the Development Cost Interest Coverage Ratio
Adjustment Amount."
SECTION 11. AMENDMENT OF SECTION 6.2(G). Section 6.2(g) of the Loan
Agreement is hereby amended by inserting after the word "Amount" in clause (B)
thereof the following: "plus (C) the Development Cost Debt Service Coverage
Ratio Adjustment Amount."
SECTION 12. AMENDMENT OF SECTION 6.2(I). Section 6.2(i) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(i) Total Indebtedness and Purchase Program Outstandings
to Capitalization Ratio. Borrower shall not, on the last day of any
fiscal quarter of Borrower, permit the ratio of (i) the sum of (A) all
consolidated Indebtedness of Borrower and the Consolidated
Subsidiaries (other than obligations under any Interest Rate
Protection Agreements and Permitted Indebtedness referred to in clause
(d) of the definition thereof) as of such date plus (B) the aggregate
amount paid by purchasers of Receivables (and property of account
debtors securing such Receivables) or interests therein under the
Revolving Receivables Purchase Program to be recovered from
Receivables (and such property) outstanding as of such date to (ii)
the sum of (A) all consolidated Indebtedness of Borrower and the
24
<PAGE> 25
Consolidated Subsidiaries (other than obligations under any Interest
Rate Protection Agreements and Permitted Indebtedness referred to in
clause (d) of the definition thereof) plus (B) the aggregate amount
paid by purchasers of Receivables (and property of account debtors
securing such Receivables) or interests therein under the Revolving
Receivables Purchase Program to be recovered from Receivables (and
such property) outstanding as of such date plus (C) consolidated Net
Worth of Borrower and the Consolidated Subsidiaries as of such date to
be more than 0.60 to 1.00.
SECTION 13. AMENDMENT OF SECTION 6.2(J). Section 6.2(j) of the Loan
Agreement is hereby amended by (a) inserting the words "make and" at the
beginning of clause (A) thereof and (b) inserting the words "exists or" after
the words "Event of Default" in clause (a) thereof.
SECTION 14. AMENDMENT OF SECTION 6.2(K). Section 6.2(k) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(k) Acquisitions. Except as may result from the mergers
permitted pursuant to Section 6.2(m), neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any
Consolidated Subsidiary to, acquire all or substantially all of the
Assets of any other Person or of a division or other business unit
thereof or Securities representing more than fifty percent (50%) of
the Securities of any class of any other Person; provided, however,
that (i) any Operating Subsidiary may purchase Inventory in bulk and
purchase or lease the warehouses where such Inventory is located upon
terms that are fair and reasonable to such purchaser, (ii) Borrower or
any Operating Subsidiary may acquire all or substantially all of the
Assets of any other Consolidated Subsidiary other than FoxMeyer Drug
Company, (iii) Borrower, any Operating Subsidiary or any Healthcare
Connect Subsidiary may acquire all or substantially all of the Assets
of any other Person or of a division or other business units thereof
(a "Business") or Securities representing more than fifty percent
(50%) of the equity Securities of any Person, provided that (A) such
Business or Person becomes a Consolidated Subsidiary, (B) such
Business or Person is Solvent before giving effect to such
acquisition, (C) neither Borrower nor any Consolidated Subsidiary
becomes, and neither such Person is nor the Assets or operations of
such Person are, or could reasonably be expected to be subject to any
material loss contingency required by GAAP to be disclosed in the
financial statements of such Person and
25
<PAGE> 26
(D) the aggregate purchase price for all such acquisitions of
Businesses or equity Securities pursuant to this clause (iii) during
any fiscal year of Borrower may not exceed $25,000,000 (exclusive, in
the case of the acquisition of a Business or all of the equity
Securities of any other Person, of amounts properly allocable to
working capital in accordance with GAAP), and provided further that
this clause (iii) shall not permit the acquisition of any Securities
of (A) NII, (B) Centaur Partners IV or (C) any Affiliate of any of the
foregoing (other than Borrower or a Consolidated Subsidiary), and (iv)
Borrower may acquire Receivables from any Consolidated Subsidiary for
sale under the terms of the Revolving Receivables Purchase Program.
For the purposes of clause (iii) above, payments made pursuant to an
earn-out or similar contingent payment arrangement shall be deemed
included in the purchase price for an acquisition for the fiscal year
as to which such payments have accrued and are payable.
SECTION 15. AMENDMENT OF SECTION 6.2(L). Section 6.2(l) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(l) Loans, Advances and Investments. Neither Borrower
nor any Operating Subsidiary shall, and Borrower shall not permit any
Consolidated Subsidiary to, directly or indirectly make any loan,
advance, extension of credit or capital contribution to, make any
investment in, or purchase or commit to purchase any Securities or
evidences of financial obligations of, or interests in, any Person
except (i) Permitted Investments, (ii) acquisition of equity
Securities permitted by Section 6.2(k)(iii), (iii) trade and customer
accounts receivable which are for goods furnished or services rendered
in the ordinary course of business and are payable in accordance with
customary trade terms, (iv) (A) existing loans, advances and capital
contributions to and from Subsidiaries, (B) loans, advances and
capital contributions to Borrower or any Operating Subsidiary
consistent with prudent business practices, (C) capital contributions
to any Operating Subsidiary to the extent necessary to ensure that
such Operating Subsidiary remains Solvent, (D) loans, advances and
capital contributions to Consolidated Subsidiaries other than
Operating Subsidiaries consistent with prudent business practices and
not to exceed $15,000,000 in aggregate amount (as to all such
Consolidated Subsidiaries collectively) at any time outstanding,
provided that in calculating the outstanding amount of such loans,
advances and capital contributions, there
26
<PAGE> 27
shall not be counted (1) amounts loaned, advanced or contributed to a
Consolidated Subsidiary from amounts received by Borrower or any
Operating Subsidiary from any other Consolidated Subsidiary (excluding
an Operating Subsidiary), (2) amounts of loans, advances or
contributions permitted by clauses (iv)(A) through (C) above or (E)
below or (3) amounts of loans, advances or contributions to a
Consolidated Subsidiary to fund Minority Equity Investments permitted
by clause (vii) below, and (E) amounts loaned, advanced or contributed
to Healthcare Connect Subsidiaries to fund acquisitions pursuant to
Section 6.2(k)(iii) in the aggregate amount (as to all Healthcare
Connect Subsidiaries collectively) not to exceed $25,000,000 during
any fiscal year of Borrower, (v) advances to employees in the ordinary
course of business not exceeding $1,000,000 in the aggregate at any
time outstanding, (vi) Permitted Customer Advances, (vii) expenditures
for Minority Equity Investments not to exceed $25,000,000 in the
aggregate at any time outstanding and (viii) the making and
maintenance of the NII Loan, subject to Section 6.2(j); provided,
however, that neither Borrower nor any Operating Subsidiary shall, and
Borrower shall not permit any Consolidated Subsidiary to, make any
loan, advance, extension of credit or capital contribution to, make
any investment in, or purchase or commit to purchase any Securities or
evidences of financial obligations of, or interests in, (A) NII (other
than the making and maintenance of the NII Loan, subject to Section
6.2(j)), (B) Centaur Partners IV, (C) any director, executive officer
or partner of NII, Centaur Partners IV or Borrower, or (D) any
Affiliate of any of the foregoing (other than Borrower or a
Consolidated Subsidiary to the extent permitted in any of clauses (i)
through (v) of this Section 6.2(l)); provided, further, however, that
accounting adjustments and operating expense reimbursements
(including, without limitation, expenses for taxes and insurance and
attorneys' fees and expenses) may be made between Borrower and NII in
the ordinary course of Borrower's business and, subject to Section
6.2(j), payments required to be made under the Tax Sharing Agreement
may be made between Borrower and NII. For the purposes of clause
(vii) above, the amount of any Minority Equity Investment in Phar-Mor,
Inc. received in satisfaction of the Phar-Mor Receivables pursuant to
the plan of reorganization in the Phar-Mor Bankruptcy shall, to the
extent of such satisfaction, be deemed to be zero, but any payment of
cash or other consideration (whether in respect of the exercise or
subscription price for options, subscription rights or other
securities or otherwise) shall reduce, to the
27
<PAGE> 28
extent of such payment, the amount available under such clause (vii).
SECTION 16. AMENDMENT OF SECTION 6.2(M). Section 6.2(m) of the Loan
Agreement is hereby amended by inserting after the words "provided, however,
that" the following words: "Healthcare Connect Subsidiaries may be merged into
other Healthcare Connect Subsidiaries, other".
SECTION 17. AMENDMENT OF SECTION 6.2(N). Section 6.2(n) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(n) No Sales of Certain Assets; Negative Pledge; No
Negative Pledge in Favor of Other Lenders. Neither Borrower nor any
Operating Subsidiary shall, and Borrower shall not permit any
Consolidated Subsidiary to, directly or indirectly, (i) sell,
transfer, assign, encumber or otherwise dispose of, or create, or
allow to be created or to otherwise exist, any Lien upon, any of the
Inventory, Receivables, Intercompany Notes or capital stock of any
Operating Subsidiary except for (A) Permitted Liens described in
clause (e) of the definition of such term, (B) sales of Inventory made
in the ordinary course of business, (C) transfers of Assets between
Borrower and the Consolidated Subsidiaries to the extent the same
would be permitted to be transferred by merger in accordance with
Section 6.2(m), and (D) sales of Receivables pursuant to the Revolving
Receivables Purchase Program and transfers of Receivables from the
Consolidated Subsidiaries to Borrower for such sale or other
disposition, or (ii) sell, transfer, assign, encumber or otherwise
dispose of, or create, or allow to be created or to otherwise exist,
any Lien upon, any of its Assets other than described in clause (i)
above except for Permitted Liens, sales of such other Assets for full
and fair consideration made in the ordinary course of business or
otherwise consistent with prudent business practices and, subject to
the consent of Administrative Agent, which consent shall not be
unreasonably withheld, sales of capital stock of Consolidated
Subsidiaries (other than Operating Subsidiaries or the Healthcare
Connect Subsidiaries or the Subsidiaries of the Healthcare Connect
Subsidiaries) for full and fair consideration; provided, however, that
neither Borrower nor any Operating Subsidiary shall sell, transfer,
assign, encumber or otherwise dispose of any capital stock of any
Operating Subsidiary, provided also, that Borrower shall cause the NII
Loan to be secured at all times by collateral equal or greater in
value, on the date of delivery of such collateral, to the then
28
<PAGE> 29
outstanding balance of the NII Loan. Except as set forth in this
Section 6.2(n) or the other Loan Papers in favor of Administrative
Agent and Lenders, in the 7.09% Note Purchase Agreements or under the
terms of the Revolving Receivables Purchase Program, neither Borrower
nor any Operating Subsidiary shall, and Borrower shall not permit any
Consolidated Subsidiary to, (1) covenant or agree, with any other
lender(s) or other Person(s), not to create, or not to allow to be
created or otherwise exist, any Lien upon any Asset of Borrower or any
Consolidated Subsidiary, or (2) covenant or agree, with any other
lender(s) or other Person(s), to any other arrangement that is
functionally equivalent or similar to a negative pledge (provided,
however, that such a negative pledge or the functional equivalent
thereof may be created or otherwise exist in favor of other lender(s)
or other Person(s) with respect to Assets of Borrower or any
Consolidated Subsidiary other than Inventory and Receivables to the
same extent that Permitted Liens, other than Permitted Liens in favor
of Administrative Agent and Lenders, are permitted to be created or
otherwise exist (pursuant to this Agreement) in favor of such other
lender(s) or other Person(s) with respect to the same Assets).
Without the prior written consent of Required Lenders, which consent
shall not be unreasonably withheld except in the case of any issuance
prohibited by Section 6.2(c) or any issuance by any Healthcare Connect
Subsidiary or its Subsidiaries, neither Borrower nor any Operating
Subsidiary shall cause, permit or consent to the issuance of any
Securities of any Consolidated Subsidiary to any Person other than
Borrower or a Consolidated Subsidiary; provided that equity Securities
of any Person whose equity Securities are acquired pursuant to Section
6.2(k)(iii) may be issued by such Person at the time of or as
consideration for such acquisition if after the issuance thereof
Borrower, the Operating Subsidiaries or the Healthcare Connect
Subsidiaries own more than fifty percent (50%) of the equity
Securities of such Person. Notwithstanding the foregoing, (x) any
factoring or sale of Receivables in bulk and (y) any sale involving a
net disposition (after taking into account any contemporaneous
purchases) of 25% or more of the consolidated property, plant and
equipment of Borrower and its Consolidated Subsidiaries shall each be
deemed not to be a sale in the ordinary course of business and, except
for sales of Receivables pursuant to the Revolving Receivables
Purchase Program, shall be prohibited by this Section 6.2(n).
Borrower shall not permit to be outstanding any Letter of Credit
unless it shall, at all times while such Letter of Credit is
outstanding, be entitled to make the deposit required by
29
<PAGE> 30
Section 3.2 without violating the 7.09% Note Purchase Agreements.
SECTION 18. AMENDMENT OF SECTION 6.2(Q). Section 6.2(q) of the Loan
Agreement is hereby amended by deleting the proviso in the first sentence
thereof and inserting in place thereof the following: "provided, however, that
Borrower may make and maintain the NII Loan (subject to Section 6.2(j)) and
maintain the Tax Sharing Agreement and the NII Management Agreement."
SECTION 19. AMENDMENT OF SECTION 6.2(W). Section 6.2(w) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(w) NII Loan Documents. Borrower shall not allow to
occur any of the following without the prior written consent of
Administrative Agent and Majority Lenders: (i) a reduction in the
interest rate applicable to the NII Loan except as may be expressly
required or permitted pursuant to the NII Loan Documents as in effect
on the date hereof, (ii) a delay in a date for the payment of accrued
interest with respect to the NII Loan, (iii) an extension of the final
maturity date of the NII Loan as provided in Section 1.4(a) of the NII
Loan Agreement to a date later than December 31, 1999, or (iv) an
increase in the maximum aggregate principal amount of loans at any
time outstanding under the NII Loan Agreement in excess of
$30,000,000. Borrower shall not allow to occur any amendment or other
modification of Sections 5.2, 5.3, 5.4, 5.5 or 6.6 of the NII Loan
Agreement without the prior written consent of the Administrative
Agent.
SECTION 20. NEW SECTION 6.2(Z). Section 6.2 of the Loan Agreement is
hereby amended to add a new Section 6.2(z) to read as follows:
(z) Amendments to or Waivers of Subordinated Debt;
Payment of Subordinated Debt. Borrower shall not: (i) amend,
supplement or otherwise modify the subordination or other provisions
of any indenture, agreement, instrument or other document evidencing
Subordinated Debt that requires the approval of Administrative Agent
in connection with the incurrence of such Indebtedness pursuant to the
definition of "Subordinated Debt", (ii) waive or otherwise relinquish
any of its rights or causes of action arising under any indenture,
agreement, instrument or other document governing or evidencing
Subordinated Debt; or (iii) prepay, redeem, defease (whether actually
or in
30
<PAGE> 31
substance) or purchase in any manner (or deposit or set aside funds
for the purpose of any of the foregoing), make any payment in respect
of principal of or premium on, or make any payment in respect of
interest (other than regularly scheduled payments of principal or
interest required in accordance with the terms governing or evidencing
the respective Indebtedness) on, or permit any of the Operating
Subsidiaries or other Consolidated Subsidiaries to prepay, redeem,
defease or purchase in any manner, make any payment in respect of
principal of, or make any payment in respect of interest (other than
regularly scheduled payments of principal or interest required in
accordance with the terms of the instruments governing or evidencing
the respective Indebtedness) on, any Subordinated Debt, whether in
connection with a change in control, sale of assets, or otherwise.
SECTION 21. AMENDMENT OF SECTION 6.3(A). Section 6.3(a) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in place thereof the following:
(a) Monthly and Other Certificates. As soon as available
and in any event on or before the third Business Day prior to the end
of each calendar month commencing with the first calendar month after
the Fourth Amendment Date, a Certificate setting forth:
(i) the calculation of the Applicable Coverage
Ratio as of the last day of the preceding month, in reasonable
detail and certified as to accuracy by a Financial Officer of
Borrower and the Operating Subsidiaries; provided, however,
that the failure to provide such Certificate shall not result
in a Potential Default or Event of Default but shall have the
effects provided in the definitions of "Applicable LIBOR
Margin" and "Applicable Facility Fee Percentage"; and
(ii) the calculation of the Applicable Leverage
Ratio for each day of the preceding month and, if on any such
day the Applicable Leverage Ratio exceeded 0.50 to 1.00, the
calculation of the ratio set forth in Section 6.2(d) as of the
last day of such preceding month, all in reasonable detail and
certified as to accuracy by a Financial Officer of Borrower
and the Operating Subsidiaries.
The Loan Agreement is hereby further amended to restate Exhibit M in its
entirety to read as set forth on Schedule II hereto.
31
<PAGE> 32
SECTION 22. AMENDMENT OF SECTION 6.3(H). Section 6.3(h) of the Loan
Agreement is hereby amended by deleting the period at the end thereof and
inserting the following phrase: "or any indenture, agreement, instrument or
other document governing or evidencing Subordinated Debt."
SECTION 23. AMENDMENT OF SECTION 6.3(O). Section 6.3(o) of the Loan
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting the following:
(o) Certain Defaults and Other Events.Promptly after the
occurrence thereof, notification of the occurrence of any default by
Borrower, NII or any of their respective Affiliates with respect to or
under (i) the 7.09% Notes or the 7.09% Note Purchase Agreements, (ii)
the Tax Sharing Agreement, (iii) the NII Loan or the NII Loan
Documents or (iv) any Subordinated Debt, the actions that Borrower
intends to take with respect to such default and any other information
with respect thereto as Administrative Agent may reasonably request
from time to time; and promptly after the occurrence thereof,
notification of any amendment, waiver or other modification of the
provisions of the 7.09% Note Purchase Agreements, the 7.09% Notes or
the 7.09% Note Guaranties, the Tax Sharing Agreement, any of the NII
Loan Documents or any indenture, agreement, instrument or other
document governing or evidencing any Subordinated Debt, together with
copies thereof.
SECTION 24. AMENDMENT OF SECTION 7.1. Section 7.1 of the Loan
Agreement is hereby amended by:
(a) deleting the phrase "Sections 6.3(f) or 6.3(g)" and
inserting in place thereof the following: "Sections 6.3(f), 6.3(g) or
6.3(o)(i) or (iv)";
(b) deleting subsection (d) thereof in its entirety and
inserting in place thereof the following:
(d) 7.09% Notes and Subordinated Debt. Any Event of
Default (as defined in the 7.09% Note Purchase Agreements) shall
occur; or any Event of Default (as defined in any indenture,
agreement, instrument or other document governing or evidencing any
Subordinated Debt) shall occur;
(c) deleting subsection (k) thereof in its entirety and
inserting in place thereof the following:
(k) Change of Control. The occurrence of any Change of
Control; provided, however, that the occurrence of a Change of Control
which has been consented to by
32
<PAGE> 33
Majority Lenders shall not constitute an Event of Default; and
provided further that, if no Subordinated Debt is then outstanding,
Lenders shall not unreasonably withhold such consent based upon such
considerations (including, without limitation, considerations
regarding character and reputation of management and conflicts of
interest) as they shall reasonably deem relevant;
SECTION 25. AMENDMENT OF SECTION 9.6. Section 9.6 of the Loan
Agreement is hereby amended by (a) inserting the phrase "and B Borrowing
Accounts" after the phrase "the B Notes" in the second sentence of subsection
(b) thereof and (b) deleting the text of subsection (g) thereof in its entirety
and inserting in place thereof the following:
(g) B Notes and B Borrowing Accounts. Notwithstanding
any other provision of this Article IX, each Lender may assign to one
or more financial institutions any B Note or, provided written notice
thereof has been received by Administrative Agent and Borrower, its B
Borrowing Account. Administrative Agent and Borrower shall be
entitled to treat a Lender as the holder of its B Borrowing Account
until notice to the contrary is received by them.
SECTION 26. AMENDMENT OF SECTION 9.7. Section 9.7 of the Loan
Agreement is hereby amended by deleting the penultimate sentence thereof in its
entirety.
SECTION 27. DOCUMENTATION AGENT. Effective upon the effectiveness of
the amendments to the Loan Agreement contemplated by this Fourth Amendment,
NationsBank and Paribas shall cease to be Co-Agents and NationsBank shall
commence to be Documentation Agent. From and after such effectiveness, all
references in the Loan Agreement to a Co-Agent or the Co-Agents shall be
deleted.
SECTION 28. AMENDMENT TO SCHEDULE I, NEW LENDERS AND OUTSTANDING
AMOUNTS.
(a) Schedule 1 to the Loan Agreement is hereby amended in its
entirety to read as set forth on Exhibit F attached hereto.
(b) Effective as of the Fourth Amendment Date, $15,000,000 and
$15,000,000 of the increase in the Aggregate Commitment under the Loan
Agreement effected by this Fourth Amendment will be assumed by The Fuji Bank,
Ltd. and The Bank of Tokyo, Ltd., Dallas Agency, respectively, and, as of such
date, such banks shall be Lenders under the Loan Agreement and shall have the
rights and obligations of a Lender thereunder.
33
<PAGE> 34
(c) Bank of America Illinois, The Fuji Bank, Ltd. and The Bank of
Tokyo, Ltd., Dallas Agency, made loans to Borrower under the Credit Agreement,
dated as of August 30, 1993, as amended, among Borrower, the Operating
Subsidiaries, various financial institutions and Bank of America Illinois, as
agent. The loans outstanding under such agreement shall be prepaid with the
proceeds of simultaneous A Advances under Section 2.1 of the Loan Agreement on
the Fourth Amendment Date and such facility shall be terminated on such date.
(d) The Lenders made A Advances to Borrower under the Loan
Agreement and, as of the date of this Fourth Amendment, $39,300,000 aggregate
principal amount of A Advances is outstanding. Effective on the Fourth
Amendment Date, Borrower shall prepay all A Advances and B Advances then
outstanding pursuant to Section 2.6(a) of the Loan Agreement from the proceeds
of simultaneous A Advances pursuant to Sections 2.1 and 2.2 of the Loan
Agreement; provided, however, that Administrative Agent and each of the Lenders
hereby waive the requirement in Section 2.6(a)(i) of the Loan Agreement solely
with respect to such prepayment. Certain of the Lenders made B Advances to
Borrower under the Loan Agreement and, as of the date of this Fourth Amendment,
$40,000,000 aggregate principal amount of B Advances is outstanding. All such
B Advances shall remain outstanding on the Fourth Amendment Date, subject to
the terms thereof. NationsBank and Paribas have issued Letters of Credit that
are outstanding under the Loan Agreement in an aggregate Stated Amount of
$8,007,240 and, as of the date of this Fourth Amendment, no amounts have been
drawn thereunder. At all times before the Fourth Amendment Date, the Lenders
(other than The Fuji Bank, Ltd. and The Bank of Tokyo, Ltd., Dallas Agency)
shall fund all A Advances and participate in all Letters of Credit under the
Loan Agreement, and be entitled to all interest, fees and other amounts payable
in respect thereof, as provided in the Loan Agreement prior to the
effectiveness of the amendments effected by this Fourth Amendment. On the
Fourth Amendment Date, before giving effect to the amendments effected by the
Fourth Amendment, the Borrower shall pay all interest, fees and other amounts
accrued and unpaid under the Loan Agreement as of such date. From and after
the Fourth Amendment Date, the Lenders shall fund all A Advances and
participate in all Letters of Credit under the Loan Agreement, and be entitled
to all interest, fees and other amounts payable in respect thereof, in
accordance with their Pro Rata Shares of the Aggregate Commitment (after giving
effect to the amendments effected by this Fourth Amendment).
34
<PAGE> 35
SECTION 29. EFFECTIVENESS OF AMENDMENTS. The amendments effected by
this Fourth Amendment shall be effective upon satisfaction of the following, in
a manner acceptable to Administrative Agent, on or before November 21, 1994
(the date of effectiveness herein called the "Amendment Date"):
(a) All of the Lenders, Issuer, Administrative Agent and
Co-Agents shall have executed and delivered this Fourth Amendment.
(b) All of the Guarantors shall have executed and
delivered the Consent and Agreement attached to this Fourth Amendment,
and all of the Operating Subsidiaries shall have executed and
delivered amendments to their respective Intercompany Notes reflecting
the increase in the Aggregate Commitment.
(c) An A Note payable to the order of each Lender in the
maximum principal amount of such Lender's Commitment (as amended by
this Fourth Amendment) shall have been duly executed by Borrower and
delivered to Administrative Agent.
(d) An amendment to the Guaranty Agreement, substantially
in the form of Exhibit B hereto, shall have been duly executed by
Guarantors and delivered to Administrative Agent.
(e) Borrower shall have paid to Administrative Agent, for
distribution to the Lenders, amendment fees in an amount, for each
such Lender, equal to the product of such Lender's Commitment (as
amended by this Fourth Amendment) times 0.075%.
(f) Borrower shall have paid to Administrative Agent, for
its own account, the arrangement fee provided in the letter agreement,
dated as of the date hereof, between Borrower and Administrative
Agent.
(g) Borrower and each Guarantor shall have delivered to
Administrative Agent certificates providing the certifications
contemplated by Section 4.1(c) and (d) of the Loan Agreement as of the
Amendment Date, including resolutions authorizing the execution,
delivery and performance of this Fourth Amendment and the other
documents contemplated hereby.
(h) (i) A legal opinion of Weil, Gotshal & Manges, and
other counsel reasonably acceptable to Administrative Agent as to
matters relating to Kansas law, as counsel for Borrower and
Consolidated Subsidiaries, substantially in the forms of Exhibit C
35
<PAGE> 36
attached hereto shall have been duly executed by such counsel and
delivered to Administrative Agent, and (ii) a favorable legal opinion
of Gibson, Dunn & Crutcher, counsel to Administrative Agent shall have
been duly executed by such counsel and delivered to Administrative
Agent.
(i) Searches of the States of Texas and Kansas and such
other States as Administrative Agent may request, setting forth all
UCC filings, financing statements and other Lien filings against
Borrower or any Operating Subsidiary in such States, shall have been
delivered to Administrative Agent, which searches shall confirm that
the Assets of Borrower and Operating Subsidiaries are free and clear
of all Liens other than Permitted Liens, if any, in such States.
(j) Consolidated cash flow projections and related
balance sheet for Borrower and the Operating Subsidiaries for the
three year period commencing with fiscal year 1995, and consolidating
cash flow projections and related balance sheets for Borrower and the
Operating Subsidiaries for the fiscal year ended 1995 shall have been
delivered to the Administrative Agent, which projections and balance
sheets shall be certified by a Financial Officer of Borrower as being
based upon reasonable assumptions and accurately calculated and shall
reflect, to the satisfaction of Administrative Agent, that, both
before and after giving effect to the transactions contemplated by
this Agreement (and assuming funding of the Loans in an amount equal
to the maximum Aggregate Commitment), each of Borrower and each
Operating Subsidiary is, both as a separate corporate entity and on a
consolidated basis with its Subsidiaries, Solvent.
(k) A Solvency Certificate in the form of Exhibit D
hereto, appropriately completed, shall have been delivered to
Administrative Agent, which Solvency Certificate shall have been
executed by a Financial Officer of Borrower and each Operating
Subsidiary and shall reflect, to the satisfaction of Administrative
Agent, that (A) both before and after giving effect to the
transactions contemplated by this Fourth Amendment (and assuming
funding of the Loans in an amount equal to the maximum Aggregate
Commitment, as amended by this Fourth Amendment), each of Borrower and
each Operating Subsidiary is, both as a separate corporate entity and
on a consolidated basis with its Subsidiaries, Solvent and (B) there
has not occurred any material adverse change in the Net Worth of
Borrower or any Operating Subsidiary
36
<PAGE> 37
since the date of the balance sheets of such corporations as of
March 31, 1994.
(l) The representations and warranties provided in
Article V of the Loan Agreement shall be true and correct on the
Amendment Date as if made on such date after giving effect to the
supplement to Schedule 2 to the Loan Agreement attached hereto as
Exhibit A (except to the extent that such representations and
warranties are expressly by their terms made only as of the date of
this Fourth Amendment or another date other than the Restatement
Date), and no Potential Default or Event of Default shall have
occurred or be continuing on the Amendment Date.
(m) Administrative Agent shall have received such other
documents, instruments, certificates and opinions as it shall deem
necessary or appropriate in connection with this Fourth Amendment and
the transactions contemplated hereby.
(n) All proceedings taken in connection with the
transactions contemplated by this Fourth Amendment shall be reasonably
satisfactory to Administrative Agent, all Loan Papers shall be in form
and substance satisfactory to Administrative Agent and all legal
matters incident to this Fourth Amendment and the other Loan Papers
and the transactions contemplated by the Loan Papers shall be
satisfactory to counsel to Administrative Agent.
(o) A Closing Certificate in the form of Exhibit E
hereto, appropriately completed, shall have been executed by Borrower
and Operating Subsidiaries and certain of their officers, as indicated
therein, and delivered to Administrative Agent, which certificate
shall certify to the satisfaction of the conditions precedent set
forth in this Section 29.
SECTION 30. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants, and each Operating Subsidiary as to matters relating to such
Operating Subsidiary represents and warrants, that this Fourth Amendment has
been duly authorized, executed and delivered by Borrower and the Operating
Subsidiaries and constitutes the legal, valid, and binding obligation of
Borrower and the Operating Subsidiaries, enforceable in accordance with its
terms (subject as to enforcement of remedies to any applicable bankruptcy,
reorganization, moratorium, or similar laws or principles of equity affecting
the enforcement of creditors' rights generally). Borrower further represents
and warrants that (a) there exists no Potential Default or Event of Default on
the
37
<PAGE> 38
date hereof, (b) the representations and warranties set forth in Article V of
the Loan Agreement are true and correct on the date hereof (including the
representations or warranties that are expressly made only as of the
Restatement Date, after giving effect to the supplement to Schedule 2 to the
Loan Agreement attached hereto as Exhibit A), and (c) Borrower and the
Operating Subsidiaries have complied with all agreements and conditions to be
complied with by it under the Loan Agreement and other Loan Papers by the date
hereof.
SECTION 31. ENTIRE AGREEMENT; RATIFICATION. This Fourth Amendment
embodies the entire agreement of the parties and supersedes any prior
agreements or understandings with respect to the subject matter hereof. Except
as modified or supplemented hereby, the Loan Agreement and all other Loan
Papers shall continue in full force and effect.
SECTION 32. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE U.S. FEDERAL LAWS.
SECTION 33. COUNTERPARTS. This Fourth Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument. In making proof hereof, it shall not be necessary to
produce or account for any counterpart other than one signed by the party
against which enforcement is sought.
SECTION 34. NO ORAL AGREEMENTS. THIS FOURTH AMENDMENT, TOGETHER WITH
THE LOAN AGREEMENT AND THE OTHER LOAN PAPERS, CONSTITUTES A "LOAN AGREEMENT"
FOR THE PURPOSES OF SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES HERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A)
BORROWER OR ANY OPERATING SUBSIDIARY AND (B) ADMINISTRATIVE AGENT, ANY
CO-AGENT, ANY LENDER OR ISSUER.
[SIGNATURES ON SUCCEEDING PAGES]
38
<PAGE> 39
IN WITNESS WHEREOF, this Fourth Amendment to Amended and Restated Loan
Agreement is executed as of the date first set forth above.
FOXMEYER CORPORATION
By_________________________________
Title:
FOXMEYER DRUG COMPANY
By_________________________________
Title:
MERCHANDISE COORDINATOR SERVICES CORPORATION
By_________________________________
Title:
HARRIS WHOLESALE COMPANY
By_________________________________
Title:
CITICORP USA, INC., individually and as
Administrative Agent
By_________________________________
Title:
<PAGE> 40
NATIONSBANK OF TEXAS, N.A., individually and
as Co-Agent and Documentation Agent
By_________________________________
Title:
BANQUE PARIBAS, individually and as Co-Agent
By_________________________________
Title:
By_________________________________
Title:
CITIBANK, N.A., as Issuer (and not a Lender)
By_________________________________
Title:
FIRST BANK NATIONAL ASSOCIATION
By_________________________________
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By_________________________________
Title:
<PAGE> 41
BANK OF AMERICA ILLINOIS
By_________________________________
Title:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By_________________________________
Title:
CREDIT SUISSE
By_________________________________
Title:
By_________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By_________________________________
Title:
THE FUJI BANK, LTD.
By_________________________________
Title:
THE BANK OF TOKYO, LTD., DALLAS AGENCY
By_________________________________
Title:
<PAGE> 42
CONSENT AND AGREEMENT
The undersigned, being all of the Guarantors (as defined in the Loan
Agreement), hereby consent and agree to the foregoing Fourth Amendment and
hereby confirm their respective obligations under their respective Guaranty
Agreements (as defined in the Loan Agreement), which shall remain in full force
and effect.
FOXMEYER DRUG COMPANY, a Kansas corporation
DRXCARE, INC.
HEALTH CARE PHARMACY PROVIDERS, INC.
HEALTH MART, INC.
FOXMEYER DRUG COMPANY, a Delaware corporation
IV PARTNERS, INC.
FOXMEYER REALTY COMPANY
FOXMEYER SOFTWARE, INC.
HEALTHCARE TRANSPORTATION SYSTEM, INC.
MERCHANDISE COORDINATOR SERVICES CORPORATION
CAROL STREAM HOLDINGS, INC.
HARRIS WHOLESALE COMPANY
HEALTH CARE PHARMACY PROVIDERS, INC.
By:___________________________________
Title:
<PAGE> 1
EXHIBIT 10-D
SECOND AMENDMENT
Dated as of November 22, 1994
THIS SECOND AMENDMENT is entered into among FOXMEYER
CORPORATION (formerly FoxMeyer Acquisition Corp., the successor in interest by
merger to FoxMeyer Corporation), a Delaware corporation (the "Seller"),
CORPORATE ASSET FUNDING COMPANY, INC., a Delaware corporation ("CAFCO"),
ENTERPRISE FUNDING CORPORATION, a Delaware corporation ("Enterprise" and,
together with CAFCO, the "Investors" and individually an "Investor"), CITIBANK,
N.A., a national banking association ("Citibank"), NATIONSBANK OF NORTH
CAROLINA, N.A., a national banking association, individually ("NationsBank")
and as co-agent (the "Co-Agent"), CITICORP NORTH AMERICA, INC., individually
("CNAI") and as agent (the "Agent"), and the other financial institutions
listed on the signature pages hereof under the heading "A Syndicate Banks" (the
"A Syndicate Banks") or "B Syndicate Banks", respectively (the "B Syndicate
Banks" and, together with Citibank, NationsBank and the A Syndicate Banks, the
"Banks"), such Banks being the financial institutions willing, on the terms and
conditions set forth herein, to continue their respective obligations, or to
assume certain obligations, as applicable, to purchase (i) in the case of each
A Syndicate Bank, "Percentage Interests" (as such term is defined in that
certain Asset Purchase Agreement dated as of November 3, 1993, as amended by
the Amendment dated as of October 27, 1994 (said Asset Purchase Agreement as so
amended being the "Asset Purchase Agreement"), between each A Syndicate Bank
and the Agent), in respect of Eligible Assets purchased by CAFCO from time to
time under and as defined in the Trade Receivables Purchase and Sale Agreement
dated as of October 29, 1993, as amended by the Amendment dated as of October
27, 1994 (said Agreement as so amended being the "Investor Agreement") among
the Seller, the Investors, the Agent and the Co-Agent, and (ii) in the case of
each Bank, ratable interests in Eligible Assets purchased from time to time
under and as defined in the Trade Receivables Purchase and Sale Agreement dated
as of October 29, 1993, as amended by the Amendment dated as of October 27,
1994 (said
<PAGE> 2
Agreement as so amended being the "Parallel Purchase Commitment" and, together
with the Investor Agreement, the "Agreements") among the Seller, the Banks,
CNAI, the Agent and the Co-Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth in the respective
Agreements.
PRELIMINARY STATEMENT. Citibank, NationsBank, the other
Banks, the Seller, the Investors, CNAI, the Agent and the Co-Agent, on the
terms and conditions stated below, have agreed, among other things, to extend
the Facility Termination Date under the Investor Agreement, the Purchase
Termination Date under the Asset Purchase Agreement (in the case of the A
Syndicate Banks) and the Commitment Termination Date under the Parallel
Purchase Commitment, in each case to November 21, 1995, to increase the
aggregate Purchase Limit under the Investor Agreement and the aggregate
Commitments under the Parallel Purchase Commitment to $200,000,000, to reduce,
under certain circumstances, the Commitment Fee payable under the Parallel
Purchase Commitment, and to provide the Seller with a new computation of the
Investor Rate under and as defined in the Investor Agreement.
SECTION 1. Amendments to the Investor Agreement. The
Investor Agreement is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 5 hereof, hereby
amended as follows:
(a) Each of the definition of the term "Collections",
contained in Section 1.01 thereof, and Section 5.01(i) of the Investor
Agreement, is amended by adding after the reference to "Section
2.07(a)" contained therein the words "or Section 10.02".
(b) The definition of the term "Concentration Limit",
contained in Section 1.01 thereof, is amended by replacing the
percentage "3%" contained therein with the percentage "4%".
(c) Clause (iii) of the definition of the term "Eligible
Receivable", contained in Section 1.01 thereof, is amended by
replacing the percentage "7%" contained therein with the percentage
"10%".
(d) Clause (v) of the definition of the term "Eligible
Receivable", contained in Section 1.01 thereof, is amended in its
entirety to read as follows:
<PAGE> 3
3
"(v) which is required to be paid in full either (A)
within 60 days from its original billing date, or (B) in the
case of any Receivable either arising from the sale of
merchandise (up to a maximum invoice amount of $100,000) to an
Obligor for a new store of such Obligor which merchandise was
ordered prior to the first day on which such store is open for
business or in respect of which the applicable Selling Party
has made available to the Obligor thereof special promotions
generally related to the special promotions offered to such
Selling Party by the manufacturer of the merchandise the sale
of which gave rise to such Receivable, either (1) within 120
days from its original billing date or (2) within 60 days from
the date of determination as to whether or not such Receivable
is an Eligible Receivable;".
(e) The definition of the term "Facility Termination
Date", contained in Section 1.01 thereof, is amended by replacing the
date "November 30, 1994" contained therein with the date "November 21,
1995".
(f) Clause (iii) of the definition of the term "Loss
Percentage", contained in Section 1.01 thereof, is amended by
replacing the percentage "15%" contained therein with the percentage
"12%".
(g) The definition of the term "Purchase Limit",
contained in Section 1.01 thereof, is amended by replacing the figure
"$75,000,000" contained therein with the figure "$120,000,000" and the
figure "$50,000,000" contained therein with the figure "$80,000,000".
(h) The definitions of the terms "Applicable LIBOR
Margin", "Applicable LIBOR Margin Ratio", "Capital", "Credit
Agreement", "Delinquency Ratio", "Fee Letter", "Funded Debt",
"Interest Expense", "Investor Rate", "Net Worth", "Obligor",
"Operating Subsidiary", "Receivable", "Selling
<PAGE> 4
4
Subsidiary" and "Selling Subsidiary Letter", contained in Section 1.01
thereof, are amended in their entirety to read as follows,
respectively:
"Applicable LIBOR Margin' means 0.50% per annum;
provided, however, that, except as otherwise set forth below,
the Applicable LIBOR Margin shall be subject to reduction or
increase on the first day of each calendar month (each an
'Effective Date'), commencing with the first day of the
calendar month following the first delivery of a certificate
pursuant to Section 5.02(e)(i), based on the Applicable
Coverage Ratio as calculated and set forth in the then most
recent certificate delivered pursuant to Section 5.02(e)(i),
as follows: from and after each Effective Date and to (but
not including) the next succeeding Effective Date, the
Applicable LIBOR Margin shall be the percentage per annum set
forth opposite the Applicable Coverage Ratio below (calculated
and set forth in such certificate):
<TABLE>
<CAPTION>
Applicable Applicable
LIBOR Margin Coverage Ratio
------------ --------------
<S> <C>
0.325% Greater than 5.00 to 1.00
0.425% Greater than 4.50 to 1.00, but less than or equal to 5.00 to
1.00
0.500% Greater than 4.00 to 1.00, but less than or equal to 4.50 to
1.00
0.5625% Greater than 3.50 to 1.00, but less than or equal to 4.00 to
1.00
</TABLE>
<PAGE> 5
5
<TABLE>
<S> <C>
0.625% Greater than 3.00 to 1.00, but less than or equal to 3.50 to
1.00
0.875% Less than or equal to 3.00 to 1.00
</TABLE>
provided, further, however, that (a) if no certificate is
delivered under Section 5.02(e)(i) during the month prior to
an Effective Date, the Applicable LIBOR Margin from and after
such Effective Date to (but not including) the next succeeding
Effective Date as to which such a certificate is delivered
shall be 0.875% per annum, and (b) if on any day the
Applicable Leverage Ratio is greater than 0.50 to 1.00, the
Applicable LIBOR Margin for such day shall be the percentage
per annum otherwise provided above plus 0.125% per annum,
provided that the Applicable Leverage Ratio shall be deemed to
be greater than 0.50 to 1.00 for each day during a calendar
month as to which a certificate is not delivered as
contemplated by Section 5.02(e)(ii); and provided, further,
however, that notwithstanding the foregoing, during each
period during which any Special Remedy Event shall have
occurred and be continuing, the Applicable LIBOR Margin shall
be 2.5% per annum."
"Applicable Coverage Ratio' means, as of any date,
the ratio of (a) (i) EBIT, plus (ii) amortization and
depreciation expense, plus (iii) the Development Cost Interest
Coverage Ratio Adjustment Amount, in each case of clauses (i)
through (iii) of the Seller and the Consolidated Subsidiaries
for the 12-month period ended on such date, to (b) Interest
Expense, plus interest income then being currently received
(to the extent such income is netted against interest charges
in computing Interest Expense), for such period."
<PAGE> 6
6
"Capital' of any Eligible Asset means the original
amount paid to the Seller for such Eligible Asset at the time
of its acquisition by the purchasers thereof pursuant to
Sections 2.01 and 2.02, or such amount divided or combined by
any dividing or combining of such Eligible Asset pursuant to
Section 2.09, in each case reduced from time to time by
Collections received and distributed on account of such
Capital pursuant to Section 2.06 or as contemplated by Section
7.01(i); provided, however, that if such Capital of such
Eligible Asset shall have been reduced by any distribution of
any portion of Collections and thereafter such distribution is
rescinded or must otherwise be returned for any reason, such
Capital of such Eligible Asset shall be increased by the
amount of such distribution, all as though such distribution
had not been made."
"Credit Agreement' means the Amended and Restated
Loan Agreement dated as of April 29, 1993, as amended by the
First Amendment to Amended and Restated Loan Agreement dated
as of October 18, 1993, the Second Amendment to Amended and
Restated Loan Agreement dated as of June 20, 1994, the Third
Amendment to Amended and Restated Loan Agreement dated as of
August 26, 1994 and the Fourth Amendment to Amended and
Restated Loan Agreement dated as of November 22, 1994, among
the Seller as Borrower, each Selling Subsidiary as Guarantors,
the Lenders and Issuer referred to therein, and Citicorp USA,
Inc. as Administrative Agent and NationsBank of Texas, N.A.
and Banque Paribas as Co-Agents, as further amended,
supplemented or otherwise modified from time to time."
"Delinquency Ratio' means the ratio (expressed as a
percentage) computed as of the last day of each calendar month
by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables of the
<PAGE> 7
7
Seller that were Delinquent Receivables at the end of each of
the preceding three months, respectively, by (ii) the
aggregate Outstanding Balance of all Pool Receivables of the
Seller at the end of each of such months, respectively."
"Fee Letter' means the letter agreement regarding
fees, dated the date hereof, between the Seller and the Agent
and the Co-Agent, as amended by the Second Amendment dated as
of November 22, 1994 amending, among other things, and among
the parties to this Agreement and the Parallel Purchase
Commitment, and as further amended, modified or supplemented
from time to time."
"Funded Debt' means, as of the date of any
determination, the sum of the following (without duplication):
(a) all Debt evidenced by the Notes or the B Borrowing Account
(in each case as defined in the Credit Agreement) as of such
date, (b) all Debt evidenced by the Seller's 7.09% Senior
Notes due April 15, 2005, as of such date, (c) all Debt
consisting of Subordinated Debt as of such date, (d) all Debt
which would be classified as 'funded debt' or 'long-term
debt', including the current portions thereof, on a
consolidated balance sheet of the Seller and the Consolidated
Subsidiaries prepared as of such date in accordance with GAAP,
(e) all Debt of the Seller or any Consolidated Subsidiary
having a final maturity (or which is renewable or extendible
at the option of the obligor for a period ending) more than
one year after the date of creation thereof, notwithstanding
that payments in respect thereof are required to be made by
such obligor less than one year after the date of the creation
thereof or that any amount thereof is at the time included
also in Current Liabilities of such obligor, (f) all Debt of
the Seller or any Consolidated Subsidiary outstanding under a
revolving credit or similar agreement providing for
<PAGE> 8
8
borrowings (and renewals and extensions thereof) over a period
of more than one year, notwithstanding that any such Debt is
created within one year of the expiration of such agreement,
(g) the present value (discounted at the implicit rate, if
known, or ten percent (10%) per annum otherwise) of all
obligations in respect of Capital Leases of the Seller or any
Consolidated Subsidiary and (h) Redeemable Capital Stock of
the Seller valued at the greater of its voluntary or
involuntary maximum fixed repurchase or redemption price plus
accrued and unpaid dividends. For purposes hereof, the
'maximum fixed repurchase or redemption price' of any
Redeemable Capital Stock which does not have a fixed
repurchase or redemption price shall be calculated in
accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased or redeemed on
any date on which Funded Debt shall be required to be
determined, and if such price is based upon, or measured by,
the fair market value of such Redeemable Capital Stock, such
fair market value to be determined in good faith by the Board
of Directors of the issuer of such Redeemable Capital Stock."
"Interest Expense' means, for any period, the
interest charges paid or accrued (without duplication) during
such period (including imputed interest on Capital Lease
obligations and amortization of debt discount, but excluding
amortization of other debt expense, and net of interest income
being currently received in cash during such period) on the
Debt of the Seller and the Consolidated Subsidiaries."
"Investor Rate' for any Fixed Period for any Eligible
Asset means:
<PAGE> 9
9
(a) in the case of any CAFCO Asset owned
by CAFCO, the per annum rate equivalent to the
weighted average of the per annum rates paid or
payable by CAFCO from time to time as interest on or
otherwise (by means of interest rate hedges or
otherwise) in respect of those promissory notes
issued by CAFCO that are allocated, in whole or in
part, by CNAI (on behalf of CAFCO) to fund the
Purchase or maintenance of such CAFCO Asset during
such Fixed Period, as determined by CNAI (on behalf
of CAFCO) on the Rate Determination Date on which
such Fixed Period ends and reported to the Seller
and, if the Collection Agent is not the Seller, the
Collection Agent, which rates shall reflect and give
effect to the commissions of placement agents and
dealers in respect of such promissory notes, to the
extent such commissions are allocated, in whole or in
part, to such promissory notes by CNAI (on behalf of
CAFCO); provided, however, that if any component of
such rate is a discount rate, in calculating the
'Investor Rate' for such Fixed Period CNAI shall for
such component use the rate resulting from converting
such discount rate to an interest bearing equivalent
rate per annum, and
(b) in the case of any Enterprise Asset
or any CAFCO Asset not owned by CAFCO, the rate
equivalent to the rate (or if more than one rate, the
weighted average of the rates) at which commercial
paper notes of the Owner thereof having a term equal
to such Fixed Period and to be issued to fund the
Purchase or maintenance of such Eligible Asset by
such Owner may be sold by any placement agent or
commercial paper dealer selected by such Owner, as
agreed between each such agent or dealer and such
Owner and notified by such Owner to the Co-Agent, the
Agent and the
<PAGE> 10
10
Collection Agent;provided, however, if the rate (or
rates) as agreed between any such agent or dealer and
such Owner with regard to any Fixed Period for any
such Eligible Asset is a discount rate (or rates),
the 'Investor Rate' for such Fixed Period shall be
the rate (or if more than one rate, the weighted
average of the rates) resulting from converting such
discount rate (or rates) to an interest-bearing
equivalent rate per annum."
"Net Worth' means, as of the date of any
determination, the remainder of (a) the total stockholder's
equity (including capital stock, additional paid-in capital
and retained earnings after deducting treasury stock) which
would appear on a consolidated balance sheet of the Seller and
the Consolidated Subsidiaries prepared as of such date in
accordance with GAAP, minus (b) to the extent not deducted
therefrom, the aggregate amount of all Redeemable Capital
Stock, minus (c) the aggregate amount of gain from the sale of
capital assets, gain from any write-up of assets and any other
non-operating or extraordinary gain reflected in total
stockholder's equity shown on such balance sheet; provided,
however, that:
(i) for purposes of the minimum Net
Worth requirement of each Operating Subsidiary set
forth in Section 5.03(h)(ii), Net Worth shall be
determined without subtraction of the items described
in clause (c) above and based upon the financial
condition of such Operating Subsidiary only; and
(ii) for purposes of the ratio calculated
pursuant to Section 5.03(h)(v) and the
Applicable Leverage Ratio, Net Worth shall be
determined
<PAGE> 11
11
without subtraction of the items described in clause
(c) above."
"Obligor' means any Person (other than Phar-Mor,
Inc., Medical Associates of America, Inc., Begley Drug, Inc.,
ALP Freddy's Limited Partners, T.M. Medical Supply, Tesoro
International Inc., Metropolitan Wholesale and Reliable Drug
Stores, Inc.) who is or becomes obligated to make payments
pursuant to a Contract."
"Operating Subsidiary' means any Selling Subsidiary,
and 'Operating Subsidiaries' means all of such corporations."
"Receivable' means the indebtedness of any Obligor
under a Contract arising from a sale of merchandise, insurance
or services by any Selling Party, and includes in each case
the right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto;
provided, however, that in the case of any such sale by
FoxMeyer Trading Company, such indebtedness will constitute a
'Receivable' hereunder only if such sale was made by such
Selling Subsidiary's RX, Salon or Full Value business line."
"Selling Subsidiary' means FoxMeyer Drug Company, or
Harris Wholesale Company, a Delaware corporation, or FoxMeyer
Trading Company, and 'Selling Subsidiaries' means all of such
corporations."
"Selling Subsidiary Letter' means, collectively, the
respective letters, in each case in substantially the form of
Exhibit E hereto, from the Selling Subsidiaries to the Agent,
the Co-Agent and the Seller, as the same may from time to time
be amended, modified or supplemented."
<PAGE> 12
12
(i) Section 1.01 of the Investor Agreement is amended by
adding thereto the following new definitions, to be added in the
applicable alphabetical order:
"Applicable Leverage Ratio' means, as of any date,
the ratio of (i) the sum of (A) all consolidated Debt of the
Seller and the Consolidated Subsidiaries (other than
obligations under any Interest Rate Protection Agreements, and
under agreements entered into in the ordinary course of
business by the Seller or an Operating Subsidiary to
repurchase at a discounted price inventory sold to customers
of the Seller or such Operating Subsidiary) as of such date
(or in the case of up to $6,000,000 in principal amount of
Permitted Indebtedness (as defined in the Credit Agreement)
consisting of industrial development revenue bonds and notes
and mortgages, as of the end of the calendar month that
includes such date) plus (B) the aggregate Capital and
'Capital' under and as defined in the Parallel Purchase
Commitment outstanding as of such date to (ii) the sum of (A)
all consolidated Debt of the Seller and the Consolidated
Subsidiaries (other than obligations under any Interest Rate
Protection Agreements, and under agreements entered into in
the ordinary course of business by the Seller or an Operating
Subsidiary to repurchase at a discounted price inventory sold
to customers of the Seller or such Operating Subsidiary) as of
such date (or in the case of up to $6,000,000 in principal
amount of Permitted Indebtedness (as defined in the Credit
Agreement) consisting of industrial development revenue bonds
and notes and mortgages, as of the end of the calendar month
that includes such date) plus (B) the aggregate Capital and
'Capital' under and as defined in the Parallel Purchase
Commitment outstanding as of such date plus (C) the
consolidated Net Worth of the Seller and the Consolidated
Subsidiaries as of the end of the calendar month that includes
such date."
<PAGE> 13
13
"Co-Agent's Account' means the special account
(account number RR871) of Enterprise maintained at the office
of Bankers Trust Company in New York, New York."
"Development Cost Debt Service Coverage Ratio
Adjustment Amount' means, as of any date of determination, the
aggregate amount of any reduction of Operating Cash Flow
attributable to any write-off of previously capitalized
software development costs or any write-offs of the costs of,
or loss on the disposition of, replaced computer software and
related hardware; provided that the aggregate amount of the
Development Cost Debt Service Coverage Ratio Adjustment Amount
utilized during any period of 12 months shall not exceed
$5,000,000 (prior to any adjustment for income taxes)."
"Development Cost Interest Coverage Ratio Adjustment
Amount' means, as of any date of determination, the aggregate
amount of any reduction of EBIT attributable to any write-off
of previously capitalized software development costs or any
write-offs of the costs of, or loss on the disposition of,
replaced computer software and related hardware; provided that
the aggregate amount of the Development Cost Interest Coverage
Ratio Adjustment Amount utilized during any period of 12
months shall not exceed $5,000,000 (prior to any adjustment
for income taxes)."
"Subordinated Debt' mans unsecured Debt of the Seller
(a) in respect of which the Seller is directly obligated and
none of the Operating Subsidiaries or other Consolidated
Subsidiaries is directly, contingently or otherwise obligated
(including by way of a Guaranty), (b) which has a final
maturity and no scheduled redemptions or other payments prior
to the
<PAGE> 14
14
expiration of one year after the Facility Termination Date and
(c) which is subordinated in right of payment to the prior
payment of the obligations of the Seller under this Agreement
on terms, and pursuant to documentation containing other terms
(including interest, covenants and events of default), in form
and substance satisfactory to the Agent in its discretion."
(j) The last sentence of Section 2.02 of the Investor
Agreement is amended in its entirety to read as follows:
"The Agent shall on the last day of each Fixed Period notify
the Seller of the Investor Rate applicable to the related
CAFCO Assets, if any, for such Fixed Period and shall on the
first day of each Fixed Period notify the Seller and the
Co-Agent of the Assignee Rate (except in the case of any
Enterprise Asset referred to in the preceding sentence) for
such Fixed Period. The Co-Agent shall on the last day of each
Fixed Period notify the Seller of the Investor Rate applicable
to the related Enterprise Assets, if any, for such Fixed
Period and, in the case of any Enterprise Asset referred to in
the second preceding sentence, shall on the first day of each
Fixed Period notify the Seller and the Agent of the Assignee
Rate applicable thereto for such Fixed Period."
(k) Sections 2.05 and 2.06 of the Investor Agreement are
amended in their entirety to read as follows, respectively:
"SECTION 2.05. Non-Liquidation Settlement
Procedures. On each day during each Settlement Period for
each Eligible Asset (other than a Liquidation Day for such
Eligible Asset or a Provisional Liquidation Day for such
Eligible Asset), the Collection Agent shall: (i) out of
Collections of Pool Receivables attributable to such Eligible
Asset received on such
<PAGE> 15
15
day, set aside and hold in trust for the Owner of such
Eligible Asset an amount equal to the Yield and Collection
Agent Fee accrued through such day for such Eligible Asset and
not so previously set aside and (ii) reinvest the remainder of
such Collections, for the benefit of such Owner, by
recomputation of such Eligible Asset pursuant to Section 2.04
as of the end of such day and the payment of such remainder to
the Seller; provided, however, that, to the extent that the
Agent or the Co-Agent or such Owner shall be required for any
reason to pay over any amount of Collections which shall have
been previously reinvested for the account of such Owner
pursuant hereto, such amount shall be deemed not to have been
so applied but rather to have been retained by the Seller and
paid over for the account of such Owner and, notwithstanding
any provision hereof to the contrary, such Owner shall have a
claim against the Seller for such amount. On the second
Business Day following the last day of each Settlement Period
for such Eligible Asset in the case of any Eligible Asset for
which Yield shall be determined for such Settlement Period
with reference to the Investor Rate, and on the last day of
each Settlement Period for each other Eligible Asset, the
Collection Agent shall deposit to the Agent's Account for the
account of the Owner of such Eligible Asset in the case of a
CAFCO Asset, and to the Co-Agent's Account for the account of
such Owner in the case of an Enterprise Asset, the amounts set
aside for such Owner during such Settlement Period for such
Eligible Asset as described in clause (i) of the first
sentence of this Section 2.05. Upon the Agent's or the
Co-Agent's, as applicable, receipt of such funds, the Agent or
Co-Agent, as applicable, shall distribute such funds on such
day to the Owner of such Eligible Asset in payment of the
accrued Yield for such Eligible Asset, and to the Collection
Agent in payment of the accrued Collection Agent Fee payable
with respect to such
<PAGE> 16
16
Eligible Asset. If there shall be insufficient funds on
deposit for the Agent or Co-Agent, as applicable, to
distribute funds in payment in full of the aforementioned
amounts for such Eligible Asset, the Agent or Co-Agent, as
applicable, shall distribute funds, first, in payment of the
accrued Yield for such Eligible Asset, and second, in payment
of the accrued Collection Agent Fee payable with respect to
such Eligible Asset.
SECTION 2.06. Liquidation Settlement
Procedures. On each Liquidation Day for each Eligible Asset
and on each Provisional Liquidation Day for each Eligible
Asset during each Settlement Period for such Eligible Asset,
the Collection Agent shall set aside and hold in trust for the
Owner of such Eligible Asset the Collections of Pool
Receivables attributable to such Eligible Asset received on
such day. On the second Business Day following the last day
of each Settlement Period for such Eligible Asset in the case
of any Eligible Asset for which Yield shall be determined for
such Settlement Period with reference to the Investor Rate,
and on the last day of each Settlement Period for each other
Eligible Asset, the Collection Agent shall deposit to the
Agent's Account for the account of the Owner of such Eligible
Asset in the case of a CAFCO Asset, and to the Co-Agent's
Account for the account of such Owner in the case of an
Enterprise Asset, the amounts set aside during such Settlement
Period for such Eligible Asset pursuant to the preceding
sentence, but not to exceed the sum of (i) the aggregate
accrued Yield for such Eligible Asset, (ii) the aggregate
outstanding Capital of such Eligible Asset, (iii) the accrued
Collection Agent Fee payable with respect to such Eligible
Asset, and (iv) the aggregate amount of other amounts owed
hereunder by the Seller to the Owner of such Eligible Asset.
Any amounts not required to be set aside
<PAGE> 17
17
pursuant to the first sentence of this Section 2.06 and any
amounts set aside pursuant to the first sentence of this
Section 2.06 and not required to be deposited to the Agent's
Account or Co-Agent's Account, as applicable, pursuant to the
foregoing provisions shall be paid to the Seller by the
Collection Agent; provided, however, that, if amounts are set
aside pursuant to the first sentence of this Section 2.06 on
any Provisional Liquidation Day which is subsequently
determined not to be a Liquidation Day, such amounts shall be
applied pursuant to the first sentence of Section 2.05 on the
day of such subsequent determination. Upon the Agent's or the
Co-Agent's, as applicable, receipt of such funds, the Agent or
Co-Agent, as applicable, shall distribute such funds (A) to
the Owner of such Eligible Asset (x) in payment of the accrued
Yield for such Eligible Asset, (y) in reduction (to zero) of
the Capital of such Eligible Asset and (z) in payment of any
other amounts owed by the Seller hereunder to the Owner of
such Eligible Asset, and (B) to the Collection Agent in
payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset. If there shall be
insufficient funds on deposit for the Agent or Co-Agent, as
applicable, to distribute funds in payment in full of the
aforementioned amounts, the Agent or Co-Agent, as applicable,
shall distribute funds, first, in payment of the accrued Yield
for such Eligible Asset, second, in reduction of Capital of
such Eligible Asset, third, in payment of other amounts
payable to the Owner of such Eligible Asset, and fourth, in
payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset."
(l) Section 2.08 of the Investor Agreement is amended in
its entirety to read as follows:
"SECTION 2.08. Payments and Computations,
<PAGE> 18
18
Etc. (a) All amounts to be paid or deposited by the Seller
or the Collection Agent hereunder shall be paid or deposited
in accordance with the terms hereof no later than 12:00 noon
(New York City time) on the day when due in lawful money of
the United States in same day funds to the Agent's Account, in
the case of any such amount payable with respect to any CAFCO
Asset or to any Owner thereof or any Affiliate of any such
Owner or to the Agent, or to the Co-Agent's Account, in the
case of any such amount payable with respect to any Enterprise
Asset or to any Owner thereof or any Affiliate of any such
Owner or to the Co-Agent. The Agent or Co-Agent, as
applicable, will promptly thereafter (on such day) cause to be
distributed (i) like funds relating to the payment out of
Collections in respect of Capital, Yield, Collection Agent Fee
or other amounts payable out of Collections, to the Owners and
the Collection Agent in accordance with the provisions of
Section 2.05 or 2.06, as applicable, and (ii) like funds
relating to the payment by the Seller of fees and other
amounts payable by the Seller hereunder, to the parties hereto
for whose benefit such amounts were paid (and if such funds
are insufficient, such distribution shall be made ratably
according to the respective amounts thereof).
(b) The Seller shall, to the extent permitted by
law, pay to the Agent or Co-Agent, as applicable, interest on
all amounts not paid or deposited when due hereunder (whether
as Collection Agent or otherwise) at 2% per annum above the
Alternate Base Rate of Citibank in effect from time to time,
payable on demand, provided, however, that such interest rate
shall not at any time exceed the maximum rate permitted by
applicable law. Such interest shall be for the account of,
and distributed by the Agent or Co-Agent, as applicable, to,
the Owners or other Indemnified Parties to which such amounts
are owed.
<PAGE> 19
19
(c) All computations of interest and all
computations of Yield, Liquidation Yield and fees hereunder
shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the
last day) elapsed."
(m) Section 2.07(c) of the Investor Agreement is amended
by replacing the words "the 20th day following the last day of each
calendar month," contained therein with the words "the 25th day (or if
such day is not a Business Day, the next succeeding Business Day)
following the last day of each calendar month,".
(n) Section 3.02(b) of the Investor Agreement is amended
by adding after clause (iv) thereof the following proviso:
"; provided, however, that if any statement set forth in
clause (iv) above shall not be true and the applicable
Investor will not waive such failure and any Purchase will not
be made by such Investor or any reinvestment will not be made
on behalf of such Investor as a result of such failure, such
Investor will use its best efforts to assign all of its rights
and obligations hereunder (including without limitation all
Eligible Assets owned by it) to an Affiliate, if any, of such
Investor which will waive such failure and make such Purchase
or permit such reinvestment hereunder and fund such Purchase
or reinvestment (subject to the terms hereof) at the Investor
Rate, such assignment, if any, to be subject to the
satisfaction of all conditions imposed by or on such Affiliate
in connection with such assignment."
(o) Section 5.01(c)(ii) of the Investor Agreement is
amended in its entirety to read as follows:
"(ii) Within 20 days after its receipt of the
<PAGE> 20
20
Agent's or Co-Agent's written request for the same (but no
more frequently than once during each fiscal year of the
Seller, in the case of any such audit to be performed at the
Seller's expense), cause its independent auditors, or permit
other independent auditors, in either case as specified by or
otherwise acceptable to the Agent and the Co-Agent, to
perform, at the Seller's expense, an audit (in a scope and
form reasonably requested by the Agent and the Co-Agent) of
the Records and any other records in respect of the Pool
Receivables and collections thereof and the performance by the
Selling Parties of their respective obligations, covenants and
duties under this Agreement and the Selling Subsidiary
Letter."
(p) Section 5.01(h) of the Investor Agreement is amended
in its entirety to read as follows:
"(h) Collections. Instruct, and cause each Selling
Subsidiary to instruct, all Obligors to cause all Collections
to be deposited directly to a Lock-Box Account or, in the case
of Obligors who send remittances of Pool Receivables to such
Selling Party, to continue to send such remittances to such
Selling Party or a Lock-Box Account; provided, however, that
until January 1, 1995, the Seller may instruct any Obligors
which do not otherwise send remittances of Pool Receivables to
a Selling Party to send such remittances to any Selling Party
for the purpose of accelerating the receipt of such
remittances provided that such Selling Party holds in trust
and deposits such remittances as set forth in Section 5.01(i)
and such Obligors are also instructed to deposit such
remittances after January 1, 1995 directly to a Lock-Box
Account."
(q) Section 5.01(l) of the Investor Agreement is amended
in its entirety to read as follows:
<PAGE> 21
21
"(l) Application of Proceeds of Purchases and
Reinvestments. So long as Section 5.10 of any Note Purchase
Agreement, or any restriction contained in such Section on the
date hereof, shall be in effect and shall not have been waived
in writing pursuant to the applicable waiver provisions of
such Note Purchase Agreement, comply in all respects with the
requirements of such Section 5.10; provided, however, that the
Seller shall not agree to, or otherwise permit, any amendment,
supplement or other modification of such Section or
restriction without providing to the Agent and the Co-Agent at
least 10 days' prior written notice thereof and, in the case
of any such amendment, supplement or other modification which
would materially adversely affect the interests of the Agent,
the Co-Agent, the Owners or the Indemnified Parties hereunder,
obtaining the prior written consent of the Agent and the
Co-Agent, and upon any such amendment, supplement or other
modification pursuant to this proviso, the Seller shall comply
with such Section or restriction as so amended, modified or
supplemented."
(r) Section 5.01(m) of the Investor Agreement is amended
in its entirety to read as follows:
"(m) Lock-Box Agreements. Deliver, or cause to be
delivered, on or before December 31, 1994, to the Agent a
Lock-Box Agreement with each Lock-Box Bank of FoxMeyer Trading
Company, in each case duly executed by such Lock-Box Bank and
FoxMeyer Trading Company, together with undated Lock-Box
Notices relating thereto executed by FoxMeyer Trading
Company."
(s) Section 5.02(e) of the Investor Agreement is amended
in its entirety to read as follows:
"(e) as soon as available and in any event on or
before the third Business Day prior to the end of each
<PAGE> 22
22
calendar month commencing with the first calendar month after
November 22, 1994, a certificate setting forth (i) the
calculation of the Applicable Coverage Ratio as of the last
day of the preceding month, in reasonable detail and certified
as to accuracy by the chief financial officer, treasurer,
assistant treasurer/director of finance or controller of the
Seller; provided, however, that the failure to provide such
certificate shall not result in an Event of Termination or
Potential Event of Termination but shall have the effect
provided in the definition of the term 'Applicable LIBOR
Margin', and (ii) the calculation of the Applicable Leverage
Ratio for each day of the preceding month, in reasonable
detail and certified as to accuracy by the chief financial
officer, treasurer, assistant treasurer/director of finance or
controller of the Seller;".
(t) Paragraph (iii) of Section 5.03(h) (concerning
Interest Coverage Ratio) of the Investor Agreement is amended by
inserting after clause (2) thereof the following:
"plus (3) the Development Cost Interest Coverage Ratio
Adjustment Amount".
(u) Paragraph (iv) of Section 5.03(h) (concerning Debt
Service Coverage Ratio) of the Investor Agreement is amended by
inserting after clause (2) thereof the following:
"plus (3) the Development Cost Debt Service Coverage Ratio
Adjustment Amount".
(v) Paragraph (v) of Section 5.03(h) (concerning Total
Indebtedness to Capitalization Ratio) of the Investor Agreement is
amended by deleting such paragraph (v) in its entirety and inserting
in place thereof the following:
"(v) Total Debt and Purchase Program Outstanding
<PAGE> 23
23
to Capitalization Ratio. Permit, on the last day of any
fiscal quarter of the Seller, the ratio of (A) the sum of (1)
all consolidated Debt of the Seller and the Consolidated
Subsidiaries (other than obligations under any Interest Rate
Protection Agreements and under agreements entered into in the
ordinary course of business by the Seller or an Operating
Subsidiary to repurchase at a discounted price inventory sold
to customers of the Seller or such Operating Subsidiary) as of
such date plus (2) the aggregate Capital and 'Capital' under
and as defined in the Parallel Purchase Commitment outstanding
as of such date to (B) the sum of (1) all consolidated Debt of
the Seller and the Consolidated Subsidiaries (other than
obligations under any Interest Rate Protection Agreements and
under agreements entered into in the ordinary course of
business by the Seller or an Operating Subsidiary to
repurchase at a discounted price inventory sold to customers
of the Seller or such Operating Subsidiary) plus (2) the
aggregate Capital and 'Capital' under and as defined in the
Parallel Purchase Commitment outstanding as of such date plus
(3) consolidated Net Worth of the Seller and the Consolidated
Subsidiaries as of such date to be more than 0.60 to 1.00."
(w) Section 7.01 of the Investor Agreement is amended (i)
by amending subsection (i) thereof in its entirety to read as follows:
"(i) Either (i) the Net Receivables Pool Balance
shall for a period of one Business Day be less than 120% of
the sum of the aggregate outstanding Capital of all the
Eligible Assets plus the aggregate outstanding 'Capital' of
all the 'Eligible Assets' under and as defined in the Parallel
Purchase Commitment or (ii) on any day the Net Receivables
Pool Balance shall be less
<PAGE> 24
24
than the sum of the aggregate outstanding Capital and
'Capital' plus the aggregate outstanding Yield Reserve and
'Yield Reserve' plus the outstanding aggregate Loss Reserve
and 'Loss Reserve' plus the aggregate outstanding Collection
Agent Fee Reserve and 'Collection Agent Fee Reserve' plus the
aggregate Dilution Reserve and 'Dilution Reserve', in each
case for all Eligible Assets and all 'Eligible Assets' under
and as defined in the Parallel Purchase Commitment, provided
that the condition described in this subsection (i) shall not
constitute an 'Event of Termination' (subject to the effects
of the proviso to the definition of the term 'Capital') if the
Seller shall on such day make a payment in reduction of
Capital to the Agent's Account, for the account of the Owners,
in an amount necessary to cause such condition to cease to
exist and shall notify the Agent of the amount of such payment
(it being understood that the Agent will distribute such
amount to the Owners ratably in accordance with the
outstanding Capital of their respective Eligible Assets, no
later than one Business Day following the day on which such
payment was made); or"
and (ii) replacing the exception "except that, in the case of any
event described above in clause (i) of subsection (g), the Facility
Termination Date for all Eligible Assets shall be deemed to have
occurred automatically upon the occurrence of such event" contained at
the end of the first sentence thereof with the exception "except that,
in the case of any event described above in clause (i) of subsection
(g) or in subsection (i), the Facility Termination Date for all
Eligible Assets shall be deemed to have occurred automatically upon
the occurrence of such event".
(x) Article X of the Investor Agreement is amended by
adding to the end thereof a new Section 10.02 to read as
<PAGE> 25
25
follows:
"SECTION 10.02. Repurchase Obligation. (a)
The Agent may at any time upon at least two Business Days'
notice to the Seller request the Seller in writing to, and
upon such request the Seller shall, repurchase from the Owners
at the purchase price set forth in subsection (b) below the
respective interests created by Eligible Assets in Pool
Receivables owed at such time by Caremark International, Inc.
(b) The repurchase price for any
interest in any Pool Receivable to be repurchased pursuant to
this Section 10.02 shall be an amount equal to the ownership
interest (as of the date of such repurchase) created by the
relevant Eligible Asset in the Outstanding Balance of such
Pool Receivable. The proceeds of any such repurchase shall be
deemed to be a Collection of such Receivable received by the
Seller on the date of such repurchase, and the amount of each
such Collection shall be applied as provided in Section 2.06
if such date is a Liquidation Day or Provisional Liquidation
Day, or 2.05 if such date is not a Liquidation Day or
Provisional Liquidation Day. Any such repurchase shall be
made without recourse or warranty, express or implied."
(y) Exhibit E to the Investor Agreement is replaced in
its entirety with Exhibit E-1 hereto.
(z) Schedule I to the Investor Agreement is amended by
adding to the end thereof the information set forth on Schedule I
hereto.
(aa) Schedule II to the Investor Agreement is amended in
its entirety to read as set forth on Schedule II hereto.
SECTION 2. Amendments to the Parallel Purchase
<PAGE> 26
26
Commitment. The Parallel Purchase Commitment is, effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 5 hereof, hereby amended as follows:
(a) Each of the definition of the term "Collections",
contained in Section 1.01 thereof, and Section 5.01(i) of the Parallel
Purchase Commitment, is amended by adding after the reference to
"Section 2.07(a)" contained therein the words "or Section 10.02".
(b) The definition of the term "Commitment", contained in
Section 1.01 thereof, is amended in its entirety to read as follows:
"Commitment' means (i) in the case of each Bank party
hereto on November 22, 1994, the amount set forth next to such
Bank's name under the caption 'Commitments' on the signature
pages to the Second Amendment dated as of November 22, 1994
to, and among the parties to, among other things, this
Agreement and the Investor Agreement (in each case subject to
any assignment thereof pursuant to Section 9.02), and (ii)
with respect to each other Bank that shall become a Bank by
entering into an Assignment and Acceptance, the amount set
forth for such Bank in the Register maintained by the Agent
pursuant to Section 9.02(c), in each case as such amount may
be reduced pursuant to Section 2.03."
(c) The definition of the term "Commitment Termination
Date", contained in Section 1.01 thereof, is amended by replacing the
date "November 30, 1994" contained therein with the date "November 21,
1995".
(d) The definition of the term "Concentration Limit",
contained in Section 1.01 thereof, is amended by replacing the
percentage "3%" contained therein with the percentage
<PAGE> 27
27
"4%".
(e) Clause (iii) of the definition of the term "Eligible
Receivable", contained in Section 1.01 thereof, is amended by
replacing the percentage "7%" contained therein with the percentage
"10%".
(f) Clause (v) of the definition of the term "Eligible
Receivable", contained in Section 1.01 thereof, is amended in its
entirety to read as follows:
"(v) which is required to be paid in full either (A)
within 60 days from its original billing date, or (B) in the
case of any Receivable either arising from the sale of
merchandise (up to a maximum invoice amount of $100,000) to an
Obligor for a new store of such Obligor which merchandise was
ordered prior to the first day on which such store is open for
business or in respect of which the applicable Selling Party
has made available to the Obligor thereof special promotions
generally related to the special promotions offered to such
Selling Party by the manufacturer of the merchandise the sale
of which gave rise to such Receivable, either (1) within 120
days from its original billing date or (2) within 60 days from
the date of determination as to whether or not such Receivable
is an Eligible Receivable;".
(g) Clause (iii) of the definition of the term "Loss
Percentage", contained in Section 1.01 thereof, is amended by
replacing the percentage "15%" contained therein with the percentage
"12%".
(h) The definitions of the terms "Applicable LIBOR
Margin", "Applicable LIBOR Margin Ratio", "Capital", "Credit
Agreement", "Delinquency Ratio", "Fee Letter", "Funded Debt",
"Interest Expense", "Net Worth", "Obligor", "Operating Subsidiary",
"Receivable", "Selling Subsidiary"
<PAGE> 28
28
and "Selling Subsidiary Letter", contained in Section 1.01 thereof,
are amended in their entirety to read as follows, respectively:
"Applicable LIBOR Margin' means 0.50% per annum;
provided, however, that, except as otherwise set forth below,
the Applicable LIBOR Margin shall be subject to reduction or
increase on the first day of each calendar month (each an
'Effective Date'), commencing with the first day of the
calendar month following the first delivery of a certificate
pursuant to Section 5.02(e)(i), based on the Applicable
Coverage Ratio as calculated and set forth in the then most
recent certificate delivered pursuant to Section 5.02(e)(i),
as follows: from and after each Effective Date and to (but
not including) the next succeeding Effective Date, the
Applicable LIBOR Margin shall be the percentage per annum set
forth opposite the Applicable Coverage Ratio below (calculated
and set forth in such certificate):
<TABLE>
<CAPTION>
Applicable Applicable
LIBOR Margin Coverage Ratio
------------ --------------
<S> <C>
0.325% Greater than 5.00 to 1.00
0.425% Greater than 4.50 to 1.00, but less than or equal to 5.00 to
1.00
0.500% Greater than 4.00 to 1.00, but less than or equal to 4.50 to
1.00
0.5625% Greater than 3.50 to 1.00, but less than or equal to 4.00 to
1.00
</TABLE>
<PAGE> 29
29
<TABLE>
<S> <C>
0.625% Greater than 3.00 to 1.00, but less than or equal to 3.50 to
1.00
0.875% Less than or equal to 3.00 to 1.00
</TABLE>
provided, further, however, that (a) if no certificate is
delivered under Section 5.02(e)(i) during the month prior to
an Effective Date, the Applicable LIBOR Margin from and after
such Effective Date to (but not including) the next succeeding
Effective Date as to which such a certificate is delivered
shall be 0.875% per annum, and (b) if on any day the
Applicable Leverage Ratio is greater than 0.50 to 1.00, the
Applicable LIBOR Margin for such day shall be the percentage
per annum otherwise provided above plus 0.125% per annum,
provided that the Applicable Leverage Ratio shall be deemed to
be greater than 0.50 to 1.00 for each day during a calendar
month as to which a certificate is not delivered as
contemplated by Section 5.02(e)(ii); and provided, further,
however, that notwithstanding the foregoing, during each
period during which any Special Remedy Event shall have
occurred and be continuing, the Applicable LIBOR Margin shall
be 2.5% per annum."
"Applicable Coverage Ratio' means, as of any date,
the ratio of (a) (i) EBIT, plus (ii) amortization and
depreciation expense, plus (iii) the Development Cost Interest
Coverage Ratio Adjustment Amount, in each case of clauses (i)
through (iii) of the Seller and the Consolidated Subsidiaries
for the 12-month period ended on such date, to (b) Interest
Expense, plus interest income then being currently received
(to the extent such income is netted against interest charges
in computing Interest Expense), for such period."
<PAGE> 30
30
"Capital' of any Eligible Asset means the original
amount paid to the Seller for such Eligible Asset at the time
of its acquisition by the purchasers thereof pursuant to
Sections 2.01 and 2.02, or such amount divided or combined by
any dividing or combining of such Eligible Asset pursuant to
Section 2.09, in each case reduced from time to time by
Collections received and distributed on account of such
Capital pursuant to Section 2.06 or as contemplated by Section
7.01(i); provided, however, that if such Capital of such
Eligible Asset shall have been reduced by any distribution of
any portion of Collections and thereafter such distribution is
rescinded or must otherwise be returned for any reason, such
Capital of such Eligible Asset shall be increased by the
amount of such distribution, all as though such distribution
had not been made."
"Credit Agreement' means the Amended and Restated
Loan Agreement dated as of April 29, 1993, as amended by the
First Amendment to Amended and Restated Loan Agreement dated
as of October 18, 1993, the Second Amendment to Amended and
Restated Loan Agreement dated as of June 20, 1994, the Third
Amendment to Amended and Restated Loan Agreement dated as of
August 26, 1994 and the Fourth Amendment to Amended and
Restated Loan Agreement dated as of November 22, 1994, among
the Seller as Borrower, each Selling Subsidiary as Guarantors,
the Lenders and Issuer referred to therein, and Citicorp USA,
Inc. as Administrative Agent and NationsBank of Texas, N.A.
and Banque Paribas as Co-Agents, as further amended,
supplemented or otherwise modified from time to time."
"Delinquency Ratio' means the ratio (expressed as a
percentage) computed as of the last day of each calendar month
by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables of the
<PAGE> 31
31
Seller that were Delinquent Receivables at the end of each of
the preceding three months, respectively, by (ii) the
aggregate Outstanding Balance of all Pool Receivables of the
Seller at the end of each of such months, respectively."
"Fee Letter' means the letter agreement regarding
fees, dated the date hereof, between the Seller and the Agent
and the Co-Agent, as amended by the Second Amendment dated as
of November 22, 1994 amending, among other things, and among
the parties to, this Agreement and the Investor Agreement, and
as further amended, modified or supplemented from time to
time."
"Funded Debt' means, as of the date of any
determination, the sum of the following (without duplication):
(a) all Debt evidenced by the Notes or the B Borrowing Account
(in each case as defined in the Credit Agreement) as of such
date, (b) all Debt evidenced by the Seller's 7.09% Senior
Notes due April 15, 2005, as of such date, (c) all Debt
consisting of Subordinated Debt as of such date, (d) all Debt
which would be classified as 'funded debt' or 'long-term
debt', including the current portions thereof, on a
consolidated balance sheet of the Seller and the Consolidated
Subsidiaries prepared as of such date in accordance with GAAP,
(e) all Debt of the Seller or any Consolidated Subsidiary
having a final maturity (or which is renewable or extendible
at the option of the obligor for a period ending) more than
one year after the date of creation thereof, notwithstanding
that payments in respect thereof are required to be made by
such obligor less than one year after the date of the creation
thereof or that any amount thereof is at the time included
also in Current Liabilities of such obligor, (f) all Debt of
the Seller or any Consolidated Subsidiary outstanding under a
revolving credit or similar agreement providing for borrowings
(and
<PAGE> 32
32
renewals and extensions thereof) over a period of more than
one year, notwithstanding that any such Debt is created within
one year of the expiration of such agreement, (g) the present
value (discounted at the implicit rate, if known, or ten
percent (10%) per annum otherwise) of all obligations in
respect of Capital Leases of the Seller or any Consolidated
Subsidiary and (h) Redeemable Capital Stock of the Seller
valued at the greater of its voluntary or involuntary maximum
fixed repurchase or redemption price plus accrued and unpaid
dividends. For purposes hereof, the 'maximum fixed repurchase
or redemption price' of any Redeemable Capital Stock which
does not have a fixed repurchase or redemption price shall be
calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were
purchased or redeemed on any date on which Funded Debt shall
be required to be determined, and if such price is based upon,
or measured by, the fair market value of such Redeemable
Capital Stock, such fair market value to be determined in good
faith by the Board of Directors of the issuer of such
Redeemable Capital Stock."
"Interest Expense' means, for any period, the
interest charges paid or accrued (without duplication) during
such period (including imputed interest on Capital Lease
obligations and amortization of debt discount, but excluding
amortization of other debt expense, and net of interest income
being currently received in cash during such period) on the
Debt of the Seller and the Consolidated Subsidiaries."
"Net Worth' means, as of the date of any
determination, the remainder of (a) the total stockholder's
equity (including capital stock, additional paid-in capital
and retained earnings after deducting treasury stock) which
would appear on a consolidated balance sheet of the Seller and
the
<PAGE> 33
33
Consolidated Subsidiaries prepared as of such date in
accordance with GAAP, minus (b) to the extent not deducted
therefrom, the aggregate amount of all Redeemable Capital
Stock, minus (c) the aggregate amount of gain from the sale of
capital assets, gain from any write-up of assets and any other
non-operating or extraordinary gain reflected in total
stockholder's equity shown on such balance sheet; provided,
however, that:
(i) for purposes of the minimum Net
Worth requirement of each Operating Subsidiary set
forth in Section 5.03(h)(ii), Net Worth shall be
determined without subtraction of the items described
in clause (c) above and based upon the financial
condition of such Operating Subsidiary only; and
(ii) for purposes of the ratio calculated
pursuant to Section 5.03(h)(v) and the Applicable
Leverage Ratio, Net Worth shall be determined without
subtraction of the items described in clause (c)
above."
"Obligor' means any Person (other than Phar-Mor,
Inc., Medical Associates of America, Inc., Begley Drug, Inc.,
ALP Freddy's Limited Partners, T.M. Medical Supply, Tesoro
International Inc., Metropolitan Wholesale and Reliable Drug
Stores, Inc.) who is or becomes obligated to make payments
pursuant to a Contract."
"Operating Subsidiary' means any Selling Subsidiary,
and 'Operating Subsidiaries' means all of such corporations."
"Receivable' means the indebtedness of any Obligor
under a Contract arising from a sale of
<PAGE> 34
34
merchandise, insurance or services by any Selling Party, and
includes in each case the right to payment of any interest or
finance charges and other obligations of such Obligor with
respect thereto; provided, however, that in the case of any
such sale by FoxMeyer Trading Company, such indebtedness will
constitute a 'Receivable' hereunder only if such sale was made
by such Selling Subsidiary's RX, Salon or Full Value business
line."
"Selling Subsidiary' means FoxMeyer Drug Company, or
Harris Wholesale Company, Delaware corporation, or FoxMeyer
Trading Company, and 'Selling Subsidiaries' means all of such
corporations."
"Selling Subsidiary Letter' means, collectively, the
respective letters, in each case in substantially the form of
Exhibit E hereto, from the Selling Subsidiaries to the Agent,
the Co-Agent and the Seller, as the same may from time to time
be amended, modified or supplemented."
(i) Section 1.01 of the Parallel Purchase Commitment is
amended by adding thereto the following new definitions, to be added
in the applicable alphabetical order:
"Applicable Leverage Ratio' means, as of any date,
the ratio of (i) the sum of (A) all consolidated Debt of the
Seller and the Consolidated Subsidiaries (other than
obligations under any Interest Rate Protection Agreements, and
under agreements entered into in the ordinary course of
business by the Seller or an Operating Subsidiary to
repurchase at a discounted price inventory sold to customers
of the Seller or such Operating Subsidiary) as of such date
(or in the case of up to $6,000,000 in principal amount of
Permitted Indebtedness (as defined in the Credit Agreement)
consisting of industrial development revenue
<PAGE> 35
35
bonds and notes and mortgages, as of the end of the calendar
month that includes such date) plus (B) the aggregate Capital
and 'Capital' under and as defined in the Investor Agreement
outstanding as of such date to (ii) the sum of (A) all
consolidated Debt of the Seller and the Consolidated
Subsidiaries (other than obligations under any Interest Rate
Protection Agreements, and under agreements entered into in
the ordinary course of business by the Seller or an Operating
Subsidiary to repurchase at a discounted price inventory sold
to customers of the Seller or such Operating Subsidiary) as of
such date (or in the case of up to $6,000,000 in principal
amount of Permitted Indebtedness (as defined in the Credit
Agreement) consisting of industrial development revenue bonds
and notes and mortgages, as of the end of the calendar month
that includes such date) plus (B) the aggregate Capital and
'Capital' under and as defined in the Investor Agreement
outstanding as of such date plus (C) the consolidated Net
Worth of the Seller and the Consolidated Subsidiaries as of
the end of the calendar month that includes such date."
"Co-Agent's Account' means the special account
(account number 001366822) of the Co-Agent maintained at the
office of NationsBank in Charlotte, North Carolina."
"Development Cost Debt Service Coverage Ratio
Adjustment Amount' means, as of any date of determination, the
aggregate amount of any reduction of Operating Cash Flow
attributable to any write-off of previously capitalized
software development costs or any write-offs of the costs of,
or loss on the disposition of, replaced computer software and
related hardware; provided that the aggregate amount of the
Development Cost Debt Service Coverage Ratio Adjustment Amount
utilized during any period of 12 months shall
<PAGE> 36
36
not exceed $5,000,000 (prior to any adjustment for income
taxes)."
"Development Cost Interest Coverage Ratio Adjustment
Amount' means, as of any date of determination, the aggregate
amount of any reduction of EBIT attributable to any write-off
of previously capitalized software development costs or any
write-offs of the costs of, or loss on the disposition of,
replaced computer software and related hardware; provided that
the aggregate amount of the Development Cost Interest Coverage
Ratio Adjustment Amount utilized during any period of 12
months shall not exceed $5,000,000 (prior to any adjustment
for income taxes)."
"Subordinated Debt' mans unsecured Debt of the Seller
(a) in respect of which the Seller is directly obligated and
none of the Operating Subsidiaries or other Consolidated
Subsidiaries is directly, contingently or otherwise obligated
(including by way of a Guaranty), (b) which has a final
maturity and no scheduled redemptions or other payments prior
to the expiration of one year after the Commitment Termination
Date and (c) which is subordinated in right of payment to the
prior payment of the obligations of the Seller under this
Agreement on terms, and pursuant to documentation containing
other terms (including interest, covenants and events of
default), in form and substance satisfactory to the Agent in
its discretion."
(j) Sections 2.05 and 2.06 of the Parallel Purchase
Commitment are amended in their entirety to read as follows,
respectively:
"SECTION 2.05. Non-Liquidation Settlement
Procedures. On each day during each Settlement Period
<PAGE> 37
37
for each Eligible Asset (other than a Liquidation Day for such
Eligible Asset or a Provisional Liquidation Day for such
Eligible Asset), the Collection Agent shall: (i) out of
Collections of Pool Receivables attributable to such Eligible
Asset received on such day, set aside and hold in trust for
the Owners of such Eligible Asset an amount equal to the Yield
and Collection Agent Fee accrued through such day for such
Eligible Asset and not so previously set aside and (ii)
reinvest the remainder of such Collections, for the benefit of
such Owners, by recomputation of such Eligible Asset pursuant
to Section 2.04 as of the end of such day and the payment of
such remainder to the Seller; provided, however, that, to the
extent that the Agent or the Co-Agent or such Owners shall be
required for any reason to pay over any amount of Collections
which shall have been previously reinvested for the account of
such Owners pursuant hereto, such amount shall be deemed not
to have been so applied but rather to have been retained by
the Seller and paid over for the account of such Owners and,
notwithstanding any provision hereof to the contrary, such
Owners shall have a claim against the Seller for such amount.
On the last day of each Settlement Period for such Eligible
Asset, the Collection Agent shall deposit to the Agent's
Account for the account of the Owners of such Eligible Asset
in the case of a CAFCO Asset, and to the Co-Agent's Account
for the account of such Owners in the case of an Enterprise
Asset, the amounts set aside for such Owners during such
Settlement Period for such Eligible Asset as described in
clause (i) of the first sentence of this Section 2.05. Upon
the Agent's or the Co-Agent's, as applicable, receipt of such
funds, the Agent or Co-Agent, as applicable, shall distribute
such funds on such day to the Owners of such Eligible Asset in
payment of the accrued Yield for such Eligible Asset, and to
the Collection Agent in payment of the accrued Collection
Agent Fee payable with
<PAGE> 38
38
respect to such Eligible Asset. If there shall be
insufficient funds on deposit for the Agent or Co-Agent, as
applicable, to distribute funds in payment in full of the
aforementioned amounts for such Eligible Asset, the Agent or
Co-Agent, as applicable, shall distribute funds, first, in
payment of the accrued Yield for such Eligible Asset, and
second, in payment of the accrued Collection Agent Fee payable
with respect to such Eligible Asset.
SECTION 2.06. Liquidation Settlement
Procedures. On each Liquidation Day for each Eligible Asset
and on each Provisional Liquidation Day for each Eligible
Asset during each Settlement Period for such Eligible Asset,
the Collection Agent shall set aside and hold in trust for the
Owners of such Eligible Asset the Collections of Pool
Receivables attributable to such Eligible Asset received on
such day. On the last day of each Settlement Period for such
Eligible Asset, the Collection Agent shall deposit to the
Agent's Account for the account of the Owners of such Eligible
Asset in the case of a CAFCO Asset, and to the Co-Agent's
Account for the account of such Owners in the case of an
Enterprise Asset, the amounts set aside during such Settlement
Period for such Eligible Asset pursuant to the preceding
sentence, but not to exceed the sum of (i) the aggregate
accrued Yield for such Eligible Asset, (ii) the aggregate
outstanding Capital of such Eligible Asset, (iii) the accrued
Collection Agent Fee payable with respect to such Eligible
Asset, and (iv) the aggregate amount of other amounts owed
hereunder by the Seller to the Owners of such Eligible Asset.
Any amounts not required to be set aside pursuant to the first
sentence of this Section 2.06 and any amounts set aside
pursuant to the first sentence of this
<PAGE> 39
39
Section 2.06 and not required to be deposited to the Agent's
Account or Co-Agent's Account, as applicable, pursuant to the
foregoing provisions shall be paid to the Seller by the
Collection Agent; provided, however, that, if amounts are set
aside pursuant to the first sentence of this Section 2.06 on
any Provisional Liquidation Day which is subsequently
determined not to be a Liquidation Day, such amounts shall be
applied pursuant to the first sentence of Section 2.05 on the
day of such subsequent determination. Upon the Agent's or the
Co-Agent's, as applicable, receipt of such funds, the Agent or
Co-Agent, as applicable, shall distribute such funds (A) to
the Owners of such Eligible Asset (x) in payment of the
accrued Yield for such Eligible Asset, (y) in reduction (to
zero) of the Capital of such Eligible Asset and (z) in payment
of any other amounts owed by the Seller hereunder to the
Owners of such Eligible Asset, and (B) to the Collection Agent
in payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset. If there shall be
insufficient funds on deposit for the Agent or Co-Agent, as
applicable, to distribute funds in payment in full of the
aforementioned amounts, the Agent or Co-Agent, as applicable,
shall distribute funds, first, in payment of the accrued Yield
for such Eligible Asset, second, in reduction of Capital of
such Eligible Asset, third, in payment of other amounts
payable to the Owners of such Eligible Asset, and fourth, in
payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset."
<PAGE> 40
40
(k) Section 2.08 of the Parallel Purchase Commitment is
amended in its entirety to read as follows:
"SECTION 2.08. Payments and Computations,
Etc. (a) All amounts to be paid or deposited by the Seller
or the Collection Agent hereunder shall be paid or deposited
in accordance with the terms hereof no later than 12:00 noon
(New York City time) on the day when due in lawful money of
the United States in same day funds to the Agent's Account, in
the case of any such amount payable with respect to any CAFCO
Asset or to any Owner thereof or any Affiliate of any such
Owner or to the Agent, or to the Co-Agent's Account, in the
case of any such amount payable with respect to any Enterprise
Asset or to any Owner thereof or any Affiliate of any such
Owner or to the Co-Agent, for the account of the applicable
Owners, the Collection Agent or any other Indemnified Party,
as applicable. The Agent or Co-Agent, as applicable, will
promptly thereafter (on such day) cause to be distributed like
funds relating to the payment of Yield, Liquidation Yield,
Capital or fees to the applicable Banks or to the applicable
Banks (other than Citibank) and CNAI, as the case may be,
ratably in accordance with their respective interests, and
like funds relating to the payment of any other amount payable
to any Indemnified Party to such Indemnified Party, in each
case to be applied in accordance with the terms of this
Agreement. Upon the Agent's acceptance of an Assignment and
Acceptance and recording of the information contained therein
in the Register pursuant to Section 9.02(c), from and after
the effective date specified in such Assignment and
Acceptance, the Agent or Co-Agent, as applicable, shall make
all payments hereunder in respect of the interest assigned
thereby to the assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such
effective
<PAGE> 41
41
date directly between themselves.
(b) The Seller hereby authorizes each Bank, if
and to the extent payment owed by the Seller to such Bank is
not made to the Agent or Co-Agent, as applicable, when due
hereunder, to charge from time to time against any or all of
the Seller's accounts with such Bank any amount so due.
(c) The Seller shall, to the extent permitted by
law, pay to the Agent or Co-Agent, as applicable, interest on
all amounts not paid or deposited when due hereunder (whether
as Collection Agent or otherwise) at 2% per annum above the
Alternate Base Rate in effect from time to time, payable on
demand, provided, however, that such interest rate shall not
at any time exceed the maximum rate permitted by applicable
law. Such interest shall be for the account of, and
distributed by the Agent or Co-Agent, as applicable, to, the
Owners or other Indemnified Parties to which such amounts are
owed.
(d) All computations of interest and all
computations of Yield, Liquidation Yield and fees hereunder
shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the
last day) elapsed."
(l) Section 2.07(c) of the Parallel Purchase Commitment
is amended by replacing the words "the 20th day following the last day
of each calendar month," contained therein with the words "the 25th
day (or if such day is not a Business Day, the next succeeding
Business Day) following the last day of each calendar month,".
(m) Clause (ii) of Section 2.10(a) of the Parallel
Purchase Commitment is amended in its entirety to read as follows:
<PAGE> 42
42
"(ii) until the later of the Collection Date and the
'Collection Date' under and as defined in the Investor
Agreement, to the Agent for the account of each of Citibank
and NationsBank and each other Bank a commitment fee (the
'Commitment Fee') from the date hereof in the case of any
Original Bank, and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Bank
in the case of each other Bank, on the average daily unused
amount (computed as set forth in Section 2.03(a)) of such
Bank's entire Commitment at the rate of 15/100 of 1% per
annum, if and so long as all of the Seller's long-term senior
debt securities shall have an actual rating by Duff & Phelps
Rating Company of at least BBB- or, in the case of any such
long-term senior debt securities which are not rated by Duff &
Phelps Rating Company, a deemed rating by the Agent and the
Co-Agent of at least BBB, or, if and so long as any of such
long-term senior debt securities shall not have such rating or
deemed rating, beginning, for any period, on the first day
during such period on which such long-term senior debt
securities shall not have such rating or deemed rating, 25/100
of 1% per annum."
(n) Section 5.01(c)(ii) of the Parallel Purchase
Commitment is amended in its entirety to read as follows:
"(ii) Within 20 days after its receipt of the
Agent's or Co-Agent's written request for the same (but no
more frequently than once during each fiscal year of the
Seller, in the case of any such audit to be performed at the
Seller's expense), cause its independent auditors, or permit
other independent auditors, in either case as specified by or
otherwise acceptable to the Agent and the Co-Agent, to
perform, at the Seller's expense, an audit (in a scope and
form reasonably requested by the Agent and the Co-Agent) of
the Records and any other records in respect of the
<PAGE> 43
43
Pool Receivables and collections thereof and the performance
by the Selling Parties of their respective obligations,
covenants and duties under this Agreement and the Selling
Subsidiary Letter."
(o) Section 5.01(h) of the Parallel Purchase Commitment
is amended in its entirety to read as follows:
"(h) Collections. Instruct, and cause each Selling
Subsidiary to instruct, all Obligors to cause all Collections
to be deposited directly to a Lock-Box Account or, in the case
of Obligors who send remittances of Pool Receivables to such
Selling Party, to continue to send such remittances to such
Selling Party or a Lock-Box Account; provided, however, that
until January 1, 1995, the Seller may instruct any Obligors
which do not otherwise send remittances of Pool Receivables to
a Selling Party to send such remittances to any Selling Party
for the purpose of accelerating the receipt of such
remittances provided that such Selling Party holds in trust
and deposits such remittances as set forth in Section 5.01(i)
and such Obligors are also instructed to deposit such
remittances after January 1, 1995 directly to a Lock-Box
Account."
(p) Section 5.01(l) of the Parallel Purchase Commitment
is amended in its entirety to read as follows:
"(l) Application of Proceeds of Purchases and
Reinvestments. So long as Section 5.10 of any Note Purchase
Agreement, or any restriction contained in such Section on the
date hereof, shall be in effect and shall not have been waived
in writing pursuant to the applicable waiver provisions of
such Note Purchase Agreement, comply in all respects with the
requirements of such Section 5.10; provided, however, that the
Seller shall not agree to, or otherwise permit, any
<PAGE> 44
44
amendment, supplement or other modification of such Section or
restriction without providing to the Agent and the Co-Agent at
least 10 days' prior written notice thereof and, in the case
of any such amendment, supplement or other modification which
would materially adversely affect the interests of the Agent,
the Co-Agent, the Owners or the Indemnified Parties hereunder,
obtaining the prior written consent of the Agent and the
Co-Agent, and upon any such amendment, supplement or other
modification pursuant to this proviso, the Seller shall comply
with such Section or restriction as so amended, modified or
supplemented."
(q) Section 5.01(m) of the Parallel Purchase Commitment
is amended in its entirety to read as follows:
"(m) Lock-Box Agreements. Deliver, or cause to be
delivered, on or before December 31, 1994, to the Agent a
Lock-Box Agreement with each Lock-Box Bank of FoxMeyer Trading
Company, in each case duly executed by such Lock-Box Bank and
FoxMeyer Trading Company, together with undated Lock-Box
Notices relating thereto executed by FoxMeyer Trading
Company."
(r) Section 5.02(e) of the Parallel Purchase Commitment
is amended in its entirety to read as follows:
"(e) as soon as available and in any event on or
before the third Business Day prior to the end of each
calendar month commencing with the first calendar month after
November 22, 1994, a certificate setting forth (i) the
calculation of the Applicable Coverage Ratio as of the last
day of the preceding month, in reasonable detail and certified
as to accuracy by the chief financial officer, treasurer,
assistant treasurer/director of finance or controller of the
Seller; provided, however, that the failure to provide such
certificate shall not result in an Event of
<PAGE> 45
45
Termination or Potential Event of Termination but shall have
the effect provided in the definition of the term 'Applicable
LIBOR Margin', and (ii) the calculation of the Applicable
Leverage Ratio for each day of the preceding month, in
reasonable detail and certified as to accuracy by the chief
financial officer, treasurer, assistant treasurer/director of
finance or controller of the Seller;".
(s) Paragraph (iii) of Section 5.03(h) (concerning
Interest Coverage Ratio) of the Parallel Purchase Commitment is
amended by inserting after clause (2) thereof the following:
"plus (3) the Development Cost Interest Coverage Ratio
Adjustment Amount".
(t) Paragraph (iv) of Section 5.03(h) (concerning Debt
Service Coverage Ratio) of the Parallel Purchase Commitment is amended
by inserting after clause (2) thereof the following:
"plus (3) the Development Cost Debt Service Coverage Ratio
Adjustment Amount".
(u) Paragraph (v) of Section 5.03(h) (concerning Total
Indebtedness to Capitalization Ratio) of the Parallel Purchase
Commitment is amended by deleting such paragraph (v) in its entirety
and inserting in place thereof the following:
"(v) Total Debt and Purchase Program Outstanding to
Capitalization Ratio. Permit, on the last day of any fiscal
quarter of the Seller, the ratio of (A) the sum of (1) all
consolidated Debt of the Seller and the Consolidated
Subsidiaries (other than obligations under any Interest Rate
Protection Agreements and under agreements entered into in the
ordinary course of
<PAGE> 46
46
business by the Seller or an Operating Subsidiary to
repurchase at a discounted price inventory sold to customers
of the Seller or such Operating Subsidiary) as of such date
plus (2) the aggregate Capital and 'Capital' under and as
defined in the Investor Agreement outstanding as of such date
to (B) the sum of (1) all consolidated Debt of the Seller and
the Consolidated Subsidiaries (other than obligations under
any Interest Rate Protection Agreements and under agreements
entered into in the ordinary course of business by the Seller
or an Operating Subsidiary to repurchase at a discounted price
inventory sold to customers of the Seller or such Operating
Subsidiary) plus (2) the aggregate Capital and 'Capital' under
and as defined in the Investor Agreement outstanding as of
such date plus (3) consolidated Net Worth of the Seller and
the Consolidated Subsidiaries as of such date to be more than
0.60 to 1.00."
(v) Section 7.01 of the Parallel Purchase Commitment is
amended (i) by amending subsection (i) thereof in its entirety to read
as follows:
"(i) Either (i) the Net Receivables Pool Balance
shall for a period of one Business Day be less than 120% of
the sum of the aggregate outstanding Capital of all the
Eligible Assets plus the aggregate outstanding 'Capital' of
all the 'Eligible Assets' under and as defined in the Investor
Agreement or (ii) on any day the Net Receivables Pool Balance
shall be less than the sum of the aggregate outstanding
Capital and 'Capital' plus the aggregate outstanding Yield
Reserve and 'Yield Reserve' plus the outstanding aggregate
Loss Reserve and 'Loss Reserve' plus the aggregate outstanding
Collection Agent Fee Reserve and 'Collection Agent Fee
Reserve' plus the aggregate Dilution Reserve and 'Dilution
Reserve', in each case for all Eligible Assets and all
'Eligible Assets' under and as defined
<PAGE> 47
47
in the Investor Agreement, provided that the condition
described in this subsection (i) shall not constitute an
'Event of Termination' (subject to the effects of the proviso
to the definition of the term 'Capital') if the Seller shall
on such day make a payment in reduction of Capital to the
Agent's Account, for the account of the Owners, in an amount
necessary to cause such condition to cease to exist and shall
notify the Agent of the amount of such payment (it being
understood that the Agent will distribute such amount to the
Owners ratably in accordance with the outstanding Capital of
their respective Eligible Assets, no later than one Business
Day following the day on which such payment was made); or"
and (ii) replacing the exception "except that, in the case of any
event described above in clause (i) of subsection (g), the Commitment
Termination Date for all Eligible Assets shall be deemed to have
occurred automatically upon the occurrence of such event" contained at
the end of the first sentence thereof with the exception "except that,
in the case of any event described above in clause (i) of subsection
(g) or in subsection (i), the Commitment Termination Date for all
Eligible Assets shall be deemed to have occurred automatically upon
the occurrence of such event".
(w) Article X of the Parallel Purchase Commitment is
amended by adding to the end thereof a new Section 10.02 to read as
follows:
"SECTION 10.02. Repurchase Obligation. (a)
The Agent may at any time upon at least two Business Days'
notice to the Seller request the Seller in writing to, and
upon such request the Seller shall, repurchase from the Owners
at the purchase price set forth in subsection (b) below the
respective interests created by Eligible Assets in Pool
Receivables owed at
<PAGE> 48
48
such time by Caremark International, Inc.
(b) The repurchase price for any
interest in any Pool Receivable to be repurchased pursuant to
this Section 10.02 shall be an amount equal to the ownership
interest (as of the date of such repurchase) created by the
relevant Eligible Asset in the Outstanding Balance of such
Pool Receivable. The proceeds of any such repurchase shall be
deemed to be a Collection of such Receivable received by the
Seller on the date of such repurchase, and the amount of each
such Collection shall be applied as provided in Section 2.06
if such date is a Liquidation Day or Provisional Liquidation
Day, or 2.05 if such date is not a Liquidation Day or
Provisional Liquidation Day. Any such repurchase shall be
made without recourse or warranty, express or implied."
(x) Exhibit E to the Parallel Purchase Commitment is
replaced in its entirety with Exhibit E-2 hereto.
(y) Schedule I to the Parallel Purchase Commitment is
amended by adding to the end thereof the information set forth on
Schedule I hereto.
(z) Schedule II to the Parallel Purchase Commitment is
amended in its entirety to read as set forth on Schedule II hereto.
SECTION 3. Amendment to Asset Purchase Agreement. The Asset
Purchase Agreement is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 5 hereof, hereby
amended by amending (a) the definition of the term "Purchase Termination Date"
contained therein by replacing the date "November 30, 1994" set forth on the
signature page thereto of each A Syndicate Bank opposite the caption "Purchase
Termination Date" with the date "November 21, 1995", and (b) the definitions of
the terms "Maximum Purchase"
<PAGE> 49
49
and "Percentage" contained therein by replacing the maximum purchase amount and
percentage amount, respectively, set forth on the signature page thereto of
each A Syndicate Bank opposite the captions "Maximum Purchase" and
"Percentage", respectively, with the amount set forth next to such A Syndicate
Bank's name under the caption "Commitment" and the percentage amount set forth
below the signature line for such A Syndicate Bank, respectively, in each case
on the signature pages hereto.
SECTION 4. Amendment to the Fee Letter. The Fee Letter is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 5 hereof, hereby amended as follows:
(a) The third paragraph thereof (regarding the Commitment
Fee payable by the Seller to the Agent for the account of Citibank
pursuant to Section 2.10(a)(ii)(B) of the Parallel Purchase
Commitment) is hereby deleted in its entirety.
(b) The fourth paragraph thereof (regarding the
Commercial Paper Dealer Commission and Placement Fee) is hereby
restated to read in its entirety:
"The Commercial Paper Dealer Commission and Placement
Fee, payable by the Seller to the Agent for the account of
each Investor other than CAFCO from time to time pursuant to
Section 2.10(a) of the Investor Agreement, shall be on the
aggregate outstanding notes issued from time to time to fund
the purchase or maintenance of the Eligible Assets of such
Investor, and is payable only during the period during which
such purchase or maintenance is funded by the issuance of such
notes, at the rate of .06 of 1% per annum."
SECTION 5. Conditions Precedent. This Second Amendment shall
become effective as of the date hereof when, and only when, all of the
following shall have occurred:
<PAGE> 50
50
(a) the Agent shall have received counterparts of this
Second Amendment executed by Citibank, NationsBank, each of the other
Banks (or, as to any Banks, advice satisfactory to the Agent that such
Banks have duly executed such amendment), the Seller, each Investor,
CNAI, the Co-Agent and the Agent, and of the consent to this Second
Amendment set forth on the signature pages hereof executed by FoxMeyer
Trading Company (the "New Selling Subsidiary") and each Selling
Subsidiary;
(b) the Agent shall have additionally received all of the
following documents, each document (unless otherwise indicated) being
dated the date of receipt thereof by the Agent (which date shall be
the same for all such documents), in form and substance satisfactory
to the Agent and the Co-Agent:
(i) A Selling Subsidiary Letter for each
Agreement, executed by the New Selling Subsidiary;
(ii) A certified copy of the charter and by-laws
of the New Selling Subsidiary;
(iii) A certified copy of the resolutions of the
Board of Directors of each of (A) the Seller approving this
Second Amendment and the Selling Subsidiary Letters of the New
Selling Subsidiary and the matters contemplated hereby and
thereby and (B) the New Selling Subsidiary approving its
Selling Subsidiary Letters and the matters contemplated
thereby;
(iv) A certificate of the Secretary or an
Assistant Secretary of each of (A) the Seller certifying the
names and true signatures of the officers of the Seller
authorized to sign this Second Amendment, the Selling
Subsidiary Letters of the New Selling Subsidiary and the other
documents to be delivered by it hereunder, (B) the New Selling
<PAGE> 51
51
Subsidiary certifying the names and true signatures of the
officers of the New Selling Subsidiary authorized to sign its
Selling Subsidiary Letters and the other documents to be
delivered by it hereunder, and (C) each Selling Subsidiary
certifying the names and true signatures of its officers
authorized to sign the consent to this Second Amendment set
forth on the signature pages hereof;
(v) Proper Financing Statements (Forms UCC-1 and
UCC-3), executed by the Seller and the New Selling Subsidiary,
as applicable, to be duly filed within ten days following the
date hereof under the UCC of the State of Texas (A) adding the
Pool Receivables sold and to be sold by the New Selling
Subsidiary to the Seller and (B) with respect to the Pool
Receivables generally, adding the New Selling Subsidiary as a
Selling Subsidiary;
(vi) Acknowledgment copies of proper Financing
Statements (Form UCC-3), if any, necessary to release all
security interests and other rights of any Person in any Pool
Receivables, Related Security, Collections or Contracts
previously granted by the Seller or the New Selling Subsidiary
other than in connection with the Agreements or the Selling
Subsidiary Letters of the New Selling Subsidiary;
(vii) Certified copies of Requests for Information
or Copies (Form UCC-11) (or a similar search report certified
by a party acceptable to the Agent and the Co-Agent), dated a
date reasonably near the date hereof, listing all effective
financing statements which name the Seller or the New Selling
Subsidiary (in each case under its present name and any
previous name) as debtor and which are filed in the
jurisdictions in which filings are to be made pursuant to
subsection (b)(v) above, together with copies of such
<PAGE> 52
52
financing statements (none of which, except those filed
pursuant to subsection (b)(v) above, shall cover any Pool
Receivables, Related Security, Collections or Contracts other
than in connection with the Agreements or the Selling
Subsidiary Letters of the New Selling Subsidiary);
(viii) Undated copies of Preliminary Lock-Box
Notices addressed to the Lock-Box Banks of the New Selling
Subsidiary and executed by the New Selling Subsidiary;
(ix) Copies of all agreements relating to the
Lock-Box Accounts of the New Selling Subsidiary (other than
any standard ministerial agreement relating to the opening of
an account, such as signature cards and the like) between each
Lock-Box Bank of the New Selling Subsidiary and the New
Selling Subsidiary;
(x) Favorable opinions of Weil, Gotshal & Manges,
counsel to the Seller and the New Selling Subsidiary, in
substantially the form contemplated by Exhibit G to the
Agreements and as to such other matters as the Agent or the
Co-Agent may reasonably request;
(xi) A favorable opinion of Shearman & Sterling,
counsel for the Agent, as the Agent may reasonably request;
and
(xii) A certificate signed by a duly authorized
officer of the Seller stating that:
(A) The representations and warranties
contained in the Agreements as amended by this Second
Amendment and in the Selling Subsidiary Letters under
the Agreements are correct on and as of the date of
such certificate as though made on and as of such
date, and
<PAGE> 53
53
(B) No event has occurred and is
continuing which constitutes an Event of Termination
or Potential Event of Termination under either
Agreement; and
(c) the fees payable to the Agent and the Co-Agent,
respectively, referred to in the respective letter agreements dated as
of the date hereof between the Seller and the Agent and the Co-Agent,
respectively, shall have been paid by the Seller.
SECTION 6. Representations and Warranties of the Seller. The
Seller represents and warrants (including without limitation for purposes of
Section 7.01(b) of the Agreements) as follows:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Second Amendment.
(b) The execution, delivery and performance by the Seller
of this Second Amendment and the Selling Subsidiary Letters of the New
Selling Subsidiary, and the performance by the Seller of the
Agreements and the Fee Letter as amended by this Second Amendment, are
within the Seller's corporate powers, have been duly authorized by all
necessary corporate action and do not (i) contravene the Seller's
charter or by-laws or law or any contractual restriction binding on or
affecting the Seller, or (ii) result in or require the creation of any
Adverse Claim upon or with respect to any of its properties (other
than pursuant thereto), or (iii) require compliance with any bulk
sales act or similar law.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery
<PAGE> 54
54
and performance by the Seller of this Second Amendment or the Selling
Subsidiary Letters of the New Selling Subsidiary or the performance by
the Seller of the Agreements or the Fee Letter as amended by this
Second Amendment, except for the filing of the UCC Financing
Statements referred to in Section 5, all of which, at the time
required in Section 5, shall be duly made and shall be in full force
and effect.
(d) This Second Amendment, the Selling Subsidiary Letters
of the New Selling Subsidiary and the Agreements and the Fee Letter as
amended by this Second Amendment constitute the legal, valid and
binding obligations of the Seller enforceable against the Seller in
accordance with their respective terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of
equity.
(e) The indebtedness invoiced and accounted for at the
Seller's Eagan warehouse is serviced in a manner substantially similar
to the other indebtedness constituting "Pool Receivables" under the
Agreements.
SECTION 7. Reference to and Effect on the Agreements, the
Asset Purchase Agreement and the Fee Letter. (a) Upon the effectiveness of
Sections 1, 2, 3 and 4 hereof, on and after the date of this Second Amendment,
each reference in either Agreement or the Asset Purchase Agreement or the Fee
Letter to "this Agreement" (or in the case of the Fee Letter, "this letter"),
"hereunder", "hereof", "herein" or words of like import, and each reference to
either Agreement or the Asset Purchase Agreement or the Fee Letter in the other
Agreement, the Fee Letter, the Asset Purchase Agreement, any Selling Subsidiary
Letter, any letter agreement with any Bank or any other document delivered in
connection with either Agreement, shall mean and be a reference to such
Agreement or the Asset Purchase Agreement or the Fee Letter, respectively, as
amended hereby.
<PAGE> 55
55
(b) Except as specifically amended above, the Agreements,
the Certificates, the Fee Letter, the Asset Purchase Agreement, the Selling
Subsidiary Letters, the respective letter agreements between the Agent or the
Co-Agent, as applicable, and the respective Banks and the other documents
delivered in connection with the Agreements are and shall continue to be in
full force and effect and are hereby ratified and confirmed.
SECTION 8. Costs and Expenses. The Seller agrees to pay on
demand all costs and expenses of each of the Agent and the Co-Agent,
respectively, in connection with the preparation, execution and delivery of
this Second Amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent and the Co-Agent, respectively, with respect
thereto and with respect to advising the Agent or the Co-Agent as to its rights
and responsibilities hereunder and thereunder. The Seller further agrees to
pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Second
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 8.
SECTION 9. Execution in Counterparts. This Second Amendment
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a
signature page to this Second Amendment and the consent referred to below by
telefacsimile shall be effective as delivery of a manually executed counterpart
of this Second Amendment and such consent.
SECTION 10. Governing Law. This Second Amendment
<PAGE> 56
56
shall be governed by and construed in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FOXMEYER CORPORATION
By:______________________________
Title:
CORPORATE ASSET FUNDING COMPANY, INC.
By: CITICORP NORTH AMERICA, INC.,
its Attorney-in-Fact
By:__________________________
Vice President
ENTERPRISE FUNDING CORPORATION
By:______________________________
Title:
CITICORP NORTH AMERICA, INC.,
individually and as Agent
By:______________________________
Vice President
<PAGE> 57
57
COMMITMENTS
$60,000,000 CITIBANK, N.A.
By:______________________________
Vice President
$50,000,000 NATIONSBANK OF NORTH CAROLINA,
N.A., individually and as Co-Agent
By:_____________________________
Title:
A SYNDICATE BANKS
$30,000,000 BANK OF AMERICA ILLINOIS (formerly
Continental Bank N.A.)
By:_____________________________
Title:
Percentage: 25.0%
$15,000,000 PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:
Percentage: 12.5%
$15,000,000 FIRST BANK NATIONAL ASSOCIATION
By:_____________________________
Title:
Percentage: 12.5%
<PAGE> 58
58
B SYNDICATE BANKS
$10,000,000 THE FUJI BANK, LTD. - HOUSTON AGENCY
By:_____________________________
Title:
$10,000,000 THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By:_____________________________
Title:
$10,000,000 THE BANK OF TOKYO, LTD.,
acting through its Dallas Agency
By:_____________________________
Title:
===================
Aggregate Commitments:
$200,000,000
CONSENT
The undersigned consent to the
foregoing Second Amendment as of
the date first above written:
FOXMEYER DRUG COMPANY
By:______________________________
Title:
<PAGE> 59
59
HARRIS WHOLESALE COMPANY
By:______________________________
Title:
MERCHANDISE COORDINATOR SERVICES
CORPORATION
By:______________________________
Title:
<PAGE> 1
EXHIBIT 10-E
AMENDMENT
TO THE
1993 STOCK OPTION AND PERFORMANCE AWARD PLAN
OF
NATIONAL INTERGROUP, INC.
Amendment, dated October 12, 1994, to the 1993 Stock Option
and Performance Award Plan (the "Plan") of National Intergroup, Inc. (the
"Company"). Capitalized terms used herein and not defined herein shall have
the meanings ascribed thereto in the Plan.
WHEREAS, the Board of Directors of the Company believes that
the aggregate number of shares of the Company's common stock, par value $5 per
share, available for the granting of options under the Plan should be increased
in order to continue to give the Board of Directors flexibility in compensating
directors, officers and key employees of the Company;
NOW, THEREFORE, subject to the approval of the stockholders of
the Company as set forth in Section 2 hereof, the Plan is hereby amended as
follows:
1. The first sentence of Section 3 of the Plan is hereby amended
to read in its entirety as follows:
"Subject to adjustments provided in Section 11, the maximum
aggregate number of shares of common stock of the Company which may be
granted for all purposes under the Plan shall be 4,000,000 shares."
2. Section 4 of the Plan is hereby amended to read in its
entirety as follows:
Grants under the Plan (i) may be made, pursuant to Sections 6,
8 and 9, to key employees, officers and directors (but not to any
director who is not an employee) of the Company, or any subsidiary
corporation thereof, who are regularly employed on a salaried basis
and who so employed on the date of such grant (the "Officer and Key
Employee Participants"), (ii) shall be made, subject to and in
accordance with Section 7, to individuals not regularly employed by
the Company who serve as directors of the Company (the "Outside
Director Participants"), and (iii) shall be made to individuals not
regularly employed by NII who serve as directors of any subsidiary
corporation of the Corporation, at the discretion of the Committee
administering the Plan.
3. This Amendment shall become effective on the date first
approved by the affirmative vote of the holders of a majority of the shares of
common stock of the Company voting at a meeting of the Company's stockholders.
<PAGE> 2
IN WITNESS WHEREOF, the Company hereby executes this Amendment
on the date first above written.
NATIONAL INTERGROUP, INC.
By:
----------------------------------------
Name: Peter B. McKee
Title: Vice President and
Chief Financial Officer
-2-
<PAGE> 1
EXHIBIT 11
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
-------------------- -------------------
1994 1993 1994 1993
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Primary
-------
Earnings
Income from operations $ 14,700 $ 7,579 $ 26,598 $ 12,982
Deduct dividends on preferred shares 4,726 3,210 14,221 5,740
--------------------- --------------------
Net income applicable to common
stockholders $ 9,974 $ 4,369 $ 12,377 $ 7,242
===================== ====================
Shares
Weighted average number of shares of common
stock outstanding 16,615 15,394 14,187 18,264
===================== ====================
Net income $ 0.60 $ 0.28 $ 0.87 $ 0.40
===================== ====================
Assuming Full Dilution
- ----------------------
Earnings
Income from operations $ 14,700 $ 7,579 $ 26,598 $ 12,982
Dividends on preferred shares (conversion of
preferred shares would be anti-dilutive) 4,726 3,210 14,221 5,740
Net income applicable to common stockholders --------------------- --------------------
$ 9,974 $ 4,369 $ 12,377 $ 7,242
===================== ====================
Shares
Weighted average number of common shares
outstanding 16,615 15,394 14,187 18,264
Conversion of preferred stock (anti-dilutive) - - - -
Assuming conversion of National Steel Corporation
4 5/8% convertible debentures - 67 13 67
Additional dilutive effect of outstanding options (as
determined by application of the treasury stock
method) 1 - 3 -
---------------------- ---------------------
Weighted average number of shares of common
stock outstanding as adjusted 16,616 15,461 14,203 18,331
====================== =====================
Net income** $ 0.60 $ 0.28 $ 0.87 $ 0.40
====================== =====================
</TABLE>
** This calculation is submitted in accordance with Regulations S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 79,292
<SECURITIES> 28,763
<RECEIVABLES> 279,051
<ALLOWANCES> 11,464
<INVENTORY> 888,301
<CURRENT-ASSETS> 1,286,815
<PP&E> 238,551
<DEPRECIATION> 83,287
<TOTAL-ASSETS> 1,835,252
<CURRENT-LIABILITIES> 857,209
<BONDS> 397,084
<COMMON> 120,836
175,589
0
<OTHER-SE> 188,912
<TOTAL-LIABILITY-AND-EQUITY> 1,835,252
<SALES> 3,813,505
<TOTAL-REVENUES> 3,813,505
<CGS> 3,556,471
<TOTAL-COSTS> 3,556,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (75)
<INTEREST-EXPENSE> 20,917
<INCOME-PRETAX> 33,245
<INCOME-TAX> 2,565
<INCOME-CONTINUING> 26,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,598
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
</TABLE>
